India: Maintainability of an Appeal to an Arbitration Award Vis a Vis Commercial Courts Act

Last Updated: 11 October 2018
Article by AMLEGALS  

APPEALS VIS-À-VIS SECTION 50 ARBITRATION AND CONCILIATION ACT 2015 AND SECTION 13 OF COMMERCIAL COURTS ACT, 2015

IN THE SUPREME COURT OF INDIA
KANDLA EXPORT CORPORATION & ANR.
VS.
M/S OCI CORPORATION & ANR.
CIVIL APPEAL NO. 1661-1663 OF 2018
SLP (CIVIL) NO. 28582 OF 2017

FACTS

An arbitration award was passed pursuant to arbitration Rule No.125 of the Grain and Feed Trade Association (GAFTA) directing the Appellants, who were the sellers, to pay the Respondents.

Being aggrieved by the Appellate award, the Appellants filed an appeal before the Queen's Bench. However the said appeal came to be rejected on 14.07.2015, on the ground that the award passed by the Appellate Tribunal was not obviously wrong.

Against the aforesaid judgement, the Appellants filed an appeal before the Queen's Bench division, Commercial Court, which was rejected on 15.09.2015.

Meanwhile, an execution petition, being E.P. No.167 of 2015, was filed under Section 48 of the Arbitration Act on 29.06.2015 by the Respondents before the District Court, Gandhidham-Kutch. Appellants field objections to this execution petition on 07.03.2016.

Subsequently, an application before the High court of Gujarat, under Section 15(5) of the Commercial Courts Act, for an appropriate order to transfer the execution petition to the High Court, was preferred by the Respondents.

By an order dated 11.11.2016, the High Court transferred the aforesaid execution petition to the commercial division of the High Court of Gujarat, and a Special Leave Petition against the said order was dismissed by this court on 03.03.2017.

On 08.08.2017, the High Court of Gujarat dismissed the objections that were filed by the Appellants and allowed the execution petition filed by the Respondents.

Appellants then filed an appeal under the Commercial Courts Act, which was also denied by a judgment dated 28.09.2017 stating that "Commercial Courts act did not provide any additional right of appeal which is not otherwise available to the Appellants under provisions of the Arbitration Act."

ISSUE BEFORE SC

Whether an appeal that is not maintainable under Section 50 of Arbitration and Conciliation Act, 1996, is nonetheless maintainable under Section 13(1) of the High Court's Act, 2015?

OBSERVATION

To discuss the impact of proviso clause Section 13(1) of the Commercial Courts Act, reference had been made by the court in the case of, CIT v. Indo-Mercantile Bank Ltd 1959 Supp (2) SCR 256 at 266-267, where it was found that:

"The proper function of a proviso is that it qualifies the generality of the main enactment by providing an exception and taking out as it were, from the main enactment, a portion which, but for the proviso would fall within the main enactment. Ordinarily it is foreign to the proper function of a proviso to read it as providing something by way of an addendum or dealing with a subject which is foreign to the main enactment. "It is a fundamental Rule of construction that a proviso must be considered with relation to the principal matter to which it stands as a proviso". Therefore it is to be construed harmoniously with the main enactment."

The proviso in question is the proviso to Section 37 and it states that, "an appeal shall lie from such orders passed by the Commercial Division of the High Court that are specifically enumerated under Order XLIII of the Code of Civil Procedure, 1908, and Section 37 of the Arbitration Act. It will at once be noticed that orders that are not specifically enumerated under Order XLIII of the Code of Civil Procedure would, therefore, not be appealable, and appeals that are mentioned in Section 37 of the Arbitration Act alone are appeals that can be made to the Commercial Appellate Division of a High Court."

Thus, an order which refers parties to arbitration Under Section 8, not being appealable Under Section 37(1)(a), would not be appealable Under Section 13(1) of the Commercial Courts Act.

Similarly, an appeal rejecting a plea referred to in Sub-sections (2) and (3) of Section 16 of the Arbitration Act would equally not be appealable under Section 37(2)(a) and therefore, under Section 13(1) of the Commercial Courts Act.

The court has also referred to case of Fuerst Day Lawson Limited v. Jindal Exports Limited, (2011) 8 SCC 333 to discuss on the question whether an order, though not appealable Under Section 50 of the Arbitration Act would, nevertheless be subject to appeal under the Letters Patent of the High Court.

The court while referring to this case has focused on principles laid down in sub-section (vii) of para 36

"(vii) The exception to the aforementioned Rule is where the special Act sets out a self-contained code and in that event the applicability of the general law procedure would be impliedly excluded. The express provision need not refer to or use the words "letters patent" but if on a reading of the provision it is clear that all further appeals are barred then even a letters patent appeal would be barred."

CONCLUDING VIEW

The Court according to the Ratio Decidendi in the case of Fuerst Day Lawson has held that: appeals filed under section 50 of arbitration act would have to follow drill of Section 50 alone.

In fact, if as per section 50 the appeal can be provided, "then alone would Section 13(1) of the Commercial Courts Act be attracted as laying down the forum which will hear and decide such an appeal."

RELIED UPON DECISIONS

The Hon'ble Court has placed reliance upon the following decisions in forming the view:

  1. Fuerst Day Lawson Limited v. Jindal Exports Limited, (2011) 8 SCC 333.
  2. Sumitomo Corporation v. CDC Financial Services (Mauritius) Ltd. and Ors, (2008) 4 SCC 91
  3. Arun Dev Upadhyaya v. Integrated Sales Service Ltd. (2016) 9 SCC 524 at 537

REASON OF JURISPRUDENCE

The Court observed that It is clear that arbitration itself was meant to be a speedy resolution of disputes between parties. Equally, enforcement of foreign awards should take place as soon as possible if India is to remain as an equal partner, in the international community.

The Raison d'etre for the enactment of the Commercial Courts Act is that commercial disputes involving high amounts of money should be speedily decided. Admittedly, if the amount contained in a foreign award to be enforced in India was less than Rs. One crore, and a Single Judge of a High Court was to enforce such award, no appeal would lie, in keeping with the object of speedy enforcement of foreign awards.

However, if, in the same fact and circumstance, a foreign award was to be for Rs. One crore or more, enforcement of such an award would be further delayed by providing an appeal under Section 13(1) of the Commercial Courts Act. Any such interpretation would lead to absurdity, and would be directly contrary to the object sought to be achieved by the Commercial Courts Act, viz., and speedy resolution of disputes of a commercial nature involving a sum of Rs. 1 crore and over.

Any construction of Section 13 of the Commercial Courts Act, which would lead to further delay, instead of an expeditious enforcement of a foreign award must, therefore, be eschewed.

Even on applying the Doctrine of Harmonious Construction of both statutes, it is clear that they are both best harmonized by giving effect to the Special Statute, i.e. the Arbitration Act, vis-à-vis the more general statute, namely the Commercial Courts Act, being left to operate in spheres other than arbitration.

AMLEGALS REMARKS

From the essence of this judgment, it can be seen that the Courts would always regard a Special Statute over a General Statute. Unless there is some ambiguity in the application of the provisions of the Special Statute, there is no need for the Courts to transgress from it and apply the provisions of a General Statute. AMLEGALS believes that this is the right approach towards the interpretation of statutes and would help in proper interpretation and understanding of the provisions of a specific act while giving due respect to the intent of formulation of such provisions.

This content is purely an academic analysis under "Legal intelligence series".

© Copyright AMLEGALS.

Disclaimer: The information contained in this document is intended for informational purposes only and does not constitute legal opinion, advice or any advertisement. This document is not intended to address the circumstances of any particular individual or corporate body. Reade should not act on the information provided herein without appropriate professional advice after a thorough examination of the facts and circumstances of a particular situation. There can be no assurance that the judicial/quasi-judicial authorities may not take a position contrary to the views mentioned herein.

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