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1997 Supreme(Cal) 238
HIGH COURT OF CALCUTTA
N.K. Mitra & Asish Baran Mukherjee, JJ.
Burn Standard Co. Ltd.
vs.
Mc. Dermott International Inc. & Ors.
DIVISION BENCH REFERENCE G.A. 1285 of 1997 A.P. 121 of 1996
Decided On : June 11, 1997
Advocate Appeared:
R.M. Chatterjee for the petitioner;
Bhaskar Gupta, Abhijit Chatterjee, Tilak Basu for the respondents.
Arbitration proceedings are not covered under Section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA).
Headnote:
ARBITRATION - STAY OF PROCEEDINGS - SICK INDUSTRIAL COMPANIES (SPECIAL PROVISIONS) ACT, 1985 (SICA) - SECTION 22(1) - SCOPE AND APPLICABILITY - ARBITRATION PROCEEDINGS - WHETHER COVERED UNDER SECTION 22(1) OF SICA - INTERPRETATION OF WORDS 'PROCEEDINGS' AND 'SUIT' IN SECTION 22(1) - HELD, ARBITRATION PROCEEDINGS NOT COVERED UNDER SECTION 22(1) OF SICA.
Fact of the Case:
The petitioner, a sick industrial company under the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA), filed an application under various provisions of the Arbitration Act, 1940, seeking, inter alia, suspension of arbitration proceedings initiated by the respondent for recovery of alleged dues. The petitioner contended that the arbitration proceedings were covered under Section 22(1) of SICA, which provides for suspension of certain legal proceedings, contracts, etc., during the pendency of an enquiry or scheme under SICA. The respondent argued that arbitration proceedings were not covered under Section 22(1) of SICA.
Finding of the Court:
The Court held that arbitration proceedings were not covered under Section 22(1) of SICA. It interpreted the words 'proceedings' and 'suit' in Section 22(1) and concluded that only coercive proceedings and certain types of suits were covered under the provision. Arbitration proceedings were not considered to be coercive in nature and were not included within the definition of 'suit' under Section 26 of the Code of Civil Procedure, 1908. The Court further held that the object of Section 22(1) was to ameliorate the hardship of a sick industry while the matter was pending before the Board for Industrial and Financial Reconstruction (BIFR), but such amelioration was by way of suspension of only certain types of proceedings and suits, and not every kind of proceedings or suits. The scope of the proceedings mentioned in the section could not be extended.
Issues: Whether arbitration proceedings are covered under Section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA).
Ratio Decidendi: The Court held that arbitration proceedings are not covered under Section 22(1) of SICA because: * The words 'proceedings' and 'suit' in Section 22(1) should be given their ordinary meaning and not an artificial or extended meaning. * Arbitration proceedings are not coercive in nature and are not included within the definition of 'suit' under Section 26 of the Code of Civil Procedure, 1908. * The object of Section 22(1) is to ameliorate the hardship of a sick industry while the matter is pending before the BIFR, but such amelioration is by way of suspension of only certain types of proceedings and suits, and not every kind of proceedings or suits.
Final Decision: The Court dismissed the petitioner's application seeking suspension of arbitration proceedings, holding that arbitration proceedings were not covered under Section 22(1) of SICA.
N.K. Mitra, J.
The petitioner Company filed an application under Ss. 5, 11, 12, 33 and 41 of the Arbitration Act in the Original Side of this Hon'ble Court being A.P. N. 121 of 1996 praying inter alia, for the following reliefs :
"(A) Leave be given to revoke the authority of respondents 2, 3 and 4 to act as arbitrators in the Case No. 6394/BGD;
(B) The arbitrators being respondents 2, 3 and 4 be removed;
(C) Further arbitration proceedings before the respondents 2, 3 and 5 be suspended;
(D) Determination of the scope and effect of the agreement for arbitration dated 25th September, 1984 with its addendum dated 29th December, 1984 more particularly with reference to the SICA, Sick Industrial Companies (Special Provisions) Act, 1985 as amended and appropriate directions upon the respondents 2, 3, 4 and 5 with regard to the suspension of the proceedings in view of the provisions of the Sick Industrial Companies (Special Provisions) Act, 1985 as amended by the Sick Industrial Companies (Special Provisions) (Amendment) Act, 1993;
(E) Stay of further proceedings in the arbitration;
(F) Injunction restraining the respondents from further proceedings with the arbitration;
(G) Ad-interim order in terms of the above prayers;
(H) Appropriate order and directions as to costs;
(I) Such further and other orders be made and directions be given as to this Hon'ble Court may deem fit and proper;”
2. Since the facts are not disputed, those are not stated, except that, in terms of the Technical Collaboration Agreement (hereinafter referred to as TCA) entered into by and between the petitioner company and the respondent No. 1 Company, which contained inter alia, an arbitration clause, an arbitration proceeding is pending for deciding the claim of the respondent no. 1 company as made against the petitioner company. In the meantime, on the application of the petitioner company, the Board for Industrial and Financial Reconstruction (hereinafter referred to as the BIFR) set up under the Sick Industrial Companies (Special Provisions) Act, 1985 (hereinafter referred to as the Act) declared the petitioner company as a sick industrial undertaking, and appointed a Special Director to the Board of the petitioner company, and further appointed the Instruction Reconstruction Bank of India (hereinafter referred to as the IRBI) as the operating agency to prepare a rehabilitation scheme and/or report which is still under process. Subsequent to the declaration of the petitioner company as a sick industrial undertaking, the petitioner company made an application before the Arbitrators, appointed under the Arbitration Clause of the TCA, for suspension of the said arbitration proceeding under s. 22(1) of the Act till the finalisation of the rehabilitation scheme by the BIFR so far as the petitioner company was concerned. As the arbitrators by a majority judgement dated 21st July, 1996 refused to suspend the arbitration proceeding under the said s. 22(1) holding inter alia, that the said section did not apply to the arbitration proceeding, the petitioner company prayed before this Hon'ble Court for suspension of the said arbitration proceeding invoking s. 22(1) of the Act. Hon'ble Justice Sujit Kumar Sinha by his judgement and/or order dated 10th September, 1996, referring to his earlier unreported judgement dated 6th August, 1996 in Matter No. 3787 of 1994 (Larsen & Toubro Ltd. vs. Jessops and Company Ltd. & Ors.) held inter alia, that the arbitration proceeding cannot be stayed or remain suspended under the said s. 22(1) and as such, rejected the petitioner's aforesaid application. The learned judge in his judgement had also referred to the other Single Bench decision of Basudev Panigrahi, J. in the case of Braithwaite and Co. Ltd. vs. D.T.M. Construction Pvt. Ltd. 1996(1) CHN 181, wherein a contrary view was taken, holding inter alia, that the decision of Panigrahi, J. as referred to above, was of doubtful authority having regard to the express provisions of s. 22(1
