Is an appeal, not maintainable under S. 50 of Arbitration Act, maintainable under the Commercial Courts Act? SC answers
News

Is an appeal, not maintainable under S. 50 of Arbitration Act, maintainable under the Commercial Courts Act? SC answers

Murali Krishnan

The Supreme Court has held that in all arbitration cases of enforcement of foreign awards, it is Section 50 of the Arbitration and Conciliation Act, 1996 (Arbitration Act) alone that provides an appeal.

In doing so, a Bench of Justices Rohinton Fali Nariman and Navin Sinha has explained the interplay between certain provisions of the Arbitration Act and the Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Act, 2015 (Commercial Courts Act, 2015).

Background

An arbitration award was passed against appellants (Kandla Export Corporation & Ors), who were the sellers, to pay the Respondents (OCI Corporation & Ors), who were the buyers, a sum of US$ 846,750.

Appeal against the said arbitral award was confirmed by the Appellate Tribunal, Queen’s Bench and Queen’s Bench Division, Commercial Court. The Appellants, undeterred, filed yet another appeal before the Court of Appeal, Civil Division, in U.K. The Court of Appeal refused to grant leave to appeal on the ground that the award was not obviously wrong.

Meanwhile, an Execution Petition, was filed under Section 48 of the Arbitration Act by the Respondents before the District Court, Gandhidham-Kutch.

On 8th August, 2017, the High Court of Gujarat allowed the execution petition filed by the Respondents. The Appellants filed an appeal under the Commercial Courts Act, which was dismissed by the impugned judgment of September 28, 2017, stating that the Commercial Courts Act did not provide any additional right of appeal which is not otherwise available to the Appellants under the provisions of the Arbitration Act.

Considering the fact that Section 50 of the Arbitration Act only provided for an appeal in case a petition to enforce a foreign award was rejected, the High Court held, keeping in view the legislative policy of the Arbitration Act, (which was to speedily determine matters relating to enforcement of foreign awards) that since an appeal did not lie from a judgment enforcing a foreign award under the said section, no such appeal would be maintainable under the Commercial Courts Act.

This led to the appeal in Supreme Court.

Rival contentions

Senior Advocate V Giri briefed by EC Agrawala, who appeared for the appellants contended that Section 13 provides an appeal to any person aggrieved by the decision of a Commercial Division of a High Court, and as Section 50 of the Arbitration Act found no place in the proviso to Section 13(1) of the Commercial Courts Act, it was clear that the wide language of Section 13(1) would confer a right of appeal, notwithstanding anything contained in Section 50 of the Arbitration Act.

This, according to him, became even clearer when read with Section 21, which provides that the provisions of the Commercial Courts Act shall have effect notwithstanding anything inconsistent contained in any other law for the time being in force. He argued that Section 37 of the Arbitration Act, which is expressly mentioned in the proviso to Section 13(1) of the Commercial Courts Act, specifically speaks of the enumerated appeals in the said provision, together with the expression “and no others”, which expression is conspicuous by its absence in Section 50 of the Arbitration Act.

He also argued that the language of Section 13(1) of the Commercial Courts Act is extremely wide – it embraces “decisions”, “judgments” and/or “orders” by the Commercial Division of a High Court, and that this being so, the impugned judgment of 8th August, 2017, allowing the execution petition filed by the Respondents, would certainly be a “decision” and/or “judgment” which would expressly be covered by the wide terms contained in Section 13(1) of the Commercial Courts Act.

Advocate Tejas Karia, Partner & Head – Arbitration at Shardul Amarchand Mangaldas, appearing on behalf of the Respondents, on the other hand, relied strongly upon Sections 10 and 11 of the Commercial Courts Act. According to Karia, the Explanation to Section 47 of the Arbitration Act, when read with Section 11 of the Commercial Courts Act, would make it clear that the non-obstante clause contained in Section 21 of the Commercial Courts Act has to give way to Section 11, and that since Section 50 of the Arbitration Act impliedly bars appeals against an application allowing execution of a foreign award, Section 13 would be out of harm’s way, insofar as his client is concerned.

He relied strongly on the judgment of this Court in Fuerst Day Lawson Limited v. Jindal Exports Limited, [(2011) 8 SCC 333], and stated that the Arbitration Act is a self-contained Code on all matters pertaining to arbitration, which would exclude the applicability of the general law contained in Section 13 of the Commercial Courts Act. Also, according to him, the object of both the Acts is to speedily determine matters pertaining to arbitration and/or commercial disputes and, the providing of an extra appeal by the Commercial Courts Act, which is impliedly excluded by the Arbitration Act, would militate against the object of both Acts.

Judgment

The Court first dealt with the Section 13 of the Commercial Courts Act. Elucidating on the proviso to Section 13, it noted that the proviso goes on to state 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 Code, 1908, and Section 37 of the Arbitration Act. That is, orders that are not specifically enumerated under Order XLIII of the CPC 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. Therefore it held that,

“…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.”

It then proceeded to consider the argument of the appellant that Section 50 of the Arbitration Act does not find any mention in the proviso to Section 13(1) of the Commercial Courts Act and, therefore, notwithstanding that an appeal would not lie under Section 50 of the Arbitration Act, it would lie under Section 13(1) of the Commercial Courts Act.

To answer this question, the Court placed reliance on judgment in Fuerst Day Lawson Limited v. Jindal Exports Limited [(2011) 8 SCC 333]. It then held that given the judgment in Fuerst Day Lawson, which Parliament was presumed to know when it enacted the Arbitration Amendment Act, 2015, and given the fact that no change was made in Section 50 of the Arbitration Act when the Commercial Courts Act was brought into force, it was clear that Section 50 is a provision contained in a self-contained code on matters pertaining to arbitration, and which is exhaustive in nature.

“It carries the negative import mentioned in paragraph 89 of Fuerst Day Lawson that appeals which are not mentioned therein, are not permissible. This being the case, it is clear that Section 13(1) of the Commercial Courts Act, being a general provision vis-à-vis arbitration relating to appeals arising out of commercial disputes, would obviously not apply to cases covered by Section 50 of the Arbitration Act.”

The Court then addressed another question – why Section 37 of the Arbitration Act was expressly included in the proviso to Section 13(1) of the Commercial Courts Act, which is equally a special provision of appeal contained in a self-contained code, which in any case would be outside Section 13(1) of the Commercial Courts Act?

“One answer is that this was done ex abundanti cautela. Another answer may be that as Section 37 itself was amended by the Arbitration Amendment Act, 2015, which came into force on the same day as the Commercial Courts Act, Parliament thought, in its wisdom, that it was necessary to emphasise that the amended Section 37 would have precedence over the general provision contained in Section 13(1) of the Commercial Courts Act. Incidentally, the amendment of 2015 introduced one more category into the category of appealable orders in the Arbitration Act, namely, a category where an order is made under Section 8 refusing to refer parties to arbitration.

Parliament may have found it necessary to emphasize the fact that an order referring parties to arbitration under Section 8 is not appealable under Section 37(1)(a) and would, therefore, not be appealable under Section 13(1) of the Commercial Courts Act. Whatever may be the ultimate reason for including Section 37 of the Arbitration Act in the proviso to Section 13(1), the ratio decidendi of the judgment in Fuerst Day Lawson would apply, and this being so, appeals filed under Section 50 of the Arbitration Act would have to follow the drill of Section 50 alone.”

The Court, therefore, held that in all arbitration cases of enforcement of foreign awards, it is Section 50 alone that provides an appeal.

“Having provided for an appeal, the forum of appeal is left “to the Court authorized by law to hear appeals from such orders”. Section 50 properly read would, therefore, mean that if an appeal lies under the said provision, 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.”

It, therefore, dismissed the appeal.

Read the judgment below.

Kandla-Export-Corporation-v.-OCI-Corporation.pdf
Preview
Bar and Bench - Indian Legal news
www.barandbench.com