Back
2011 Supreme(Mad) 4622
High Court of Judicature at Madras
THE HONOURABLE MRS. JUSTICE R. BANUMATHI & THE HONOURABLE MS. JUSTICE R. MALA
Gammon India Ltd.
Versus
Sankaranarayana Construction (Bangalore) Pvt. Ltd.
O.S.A.No. 112 of 2010
Decided On :Decided on : 30-11-2011
For the Appellant:R. Senthil Kumar, Advocate.
For the Respondent:T.A. Srinivasan for M/S. Sree and Associates, Advocates.
Headnote:
Arbitration - Interim Award - Section 31(6) of the Arbitration and Conciliation Act - Summary of Acts and Sections: Section 31(6) of the Arbitration and Conciliation Act empowers an arbitral tribunal to make an interim arbitral award on any matter with respect to which it may make a final arbitral award at any time during the arbitral proceedings. The definition of arbitral award in s 2(c) includes an interim award. The court held that the arbitral Tribunal is empowered to pass an interim award on admission, as in the case of Order XII Rule 6 C.P.C. The court also discussed Section 19 of the Arbitration and Conciliation Act, which provides that the arbitral tribunal is not bound by the Code of Civil Procedure, 1908 or the Indian Evidence Act, 1872. The court concluded that the arbitral tribunal has the discretion to adopt the principles of the Code of Civil Procedure 1908 or design the procedure to fit the exigencies of the subject matter of the arbitration. The court also discussed the distinction between an adjustment and set off and the distinction between a legal set off and an equitable set off.
Fact of the Case:
The case involved a dispute between the Appellant/Petitioner and the Respondent, who was a Sub-Contractor under the Appellant/Petitioner for the construction of a Masonry Dam. The Respondent filed an application under Section 11 of the Arbitration and Conciliation Act, 1996, and an interim award was passed directing the Appellant/Petitioner to deposit a sum of Rs.56,63,990/- to the credit of the case within six weeks and permitting the respondent to withdraw the same after furnishing Bank Guarantee. The Appellant/Petitioner challenged the interim award, but the learned Single Judge permitted the Respondent to withdraw the amount deposited in the execution proceedings.
Finding of the Court:
The court found that the arbitral Tribunal is empowered to pass an interim award on admission, as in the case of Order XII Rule 6 C.P.C. The court also held that the admission made by the Appellant/Petitioner was clear, unambiguous, and unequivocal, and therefore, the interim award was justified. The court further concluded that the distinction between an adjustment and set off and the distinction between a legal set off and an equitable set off were relevant to the case.
Issues: The issues involved in the case included the empowerment of the arbitral Tribunal to pass an interim award on admission, the interpretation of Section 31(6) of the Arbitration and Conciliation Act, and the distinction between an adjustment and set off and the distinction between a legal set off and an equitable set off.
Ratio Decidendi: The court's decision was based on the interpretation of Section 31(6) of the Arbitration and Conciliation Act, which empowers an arbitral tribunal to make an interim arbitral award on any matter with respect to which it may make a final arbitral award at any time during the arbitral proceedings. The court also considered the distinction between an adjustment and set off and the distinction between a legal set off and an equitable set off.
Final Decision: The court dismissed the Original Side Appeal, confirming the order passed by the learned Single Judge in Tr.O.P.No.628 of 2008, dated 11.10.2009, and directed both parties to bear their own costs.
R.MALA,J.
1. Challenge in this appeal is the Judgment and decreetal order passed in Tr.O.P.No.628 of 2008, dated 11.10.2009, in and by which, the learned single Judge permitted the Respondent herein to furnish Bank Guarantee in the very same execution proceedings, and withdraw the amount deposited therein by the Petitioner, who is the Appellant herein.
2. Appellant/Petitioner was awarded a contract for the construction of a Masonry Dam across the Tamiraparani river basin in Mekarai Village, Shenkottah Taluk, Tirunelveli District. Block nos. 11 to 18 were assigned by the Appellant/Petitioner to the Respondent, by way of sub-contract, under a Work Order dated 02.11.2000. Since dispute arose between the parties, compelling the Respondent herein to file an application under Section 11 of the Arbitration and Conciliation Act, 1996. By an order dated 16.04.2005 passed in O.P.No.538 of 2003, Honble Mr.Justice N.V.Balasubramanian (Retired) was appointed as Arbitrator and he entered reference and passed an interim award dated 16.12.2006, directing the Appellant/Petitioner herein to deposit a sum of Rs.56,63,990/-to the credit of O.P.No.538 of 2003 within six weeks and permitting the respondent to withdraw the same after furnishing Bank Guarantee.
3. Challenging the said interim award, Appellant/Petitioner filed a petition in O.P.No.51 of 2007, under Section 34 before the District Court, Tirunelveli, but it was returned with a direction to present before the appropriate forum, against which, the Appellant/Petitioner filed Revision Petition in CRP(PD)(MD)No.414 of 2008 and the same was dismissed. Hence, he represented the same before the Original Side of this Court and it was taken on file.
4. It is pertinent to note that after passing of an interim award, the Respondent herein has initiated execution proceeding before the Mumbai High Court in E.P.No.85 of 2008, where the interim award amount has been deposited before the Sheriff of Mumbai High Court. Admittedly, Appellant/Petitioner herein filed an application for rejection of main O.P. in A.No. 5264 of 2008, which was dismissed, against which, no O.S.A. has been filed.
5. Appellant/Petitioner filed Tr.O.P.No.628 of 2008 challenging the interim award passed by the Arbitrator and stated that arbitral Tribunal has not empowered to pass an interim award on admission, as in the case of Order XII, Rule 6, C.P.C. His second submission is that in any case, a decree/award on admission cannot be passed unless the admission was clear, unambiguous and unequivocal and the statement of defence was not an admission at all. His third limb of argument is statement of defence was only an adjustment, which was different from even a set off and that therefore, no interim award that would have the effect of upsetting such adjustment could be passed.
6. The learned Single Judge after considering the argument of both sides and several decisions relied upon by both sides, negatived the argument advanced by the learned counsel for Appellant/Petitioner stating that the Arbitrator has every right to pass an interim award on admission. He has further held that the Appellant/Petitioner lodged a counter claim to the extent of Rs.75,16,276/-before the Arbitrator and the balance amount, Appellant/Petitioner claimed to have adjusted is a sum of Rs.56,63,990/-against his own claim of Rs.1,31,80,266/-. Hence, the learned single Judge has allowed the application in A.No.5748/2008 permitting the Respondent herein to withdraw the amount of Rs.56,63,990/-, against which, the present Original Side Appeal has been preferred.
7. Mr.R.Senthil Kumar, learned counsel appearing for the Appellant/Petitioner would reiterate the arguments that he advanced before the learned single Judge and again raised the same three points. He would take us to Section 19 of the Arbitration and Conciliation Act (hereinafter referred to as "Act") and submitted that as per Section 19 of the Act, arbitral Tribunal is not bound by the Code
