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CASE NO.:

Appeal (civil) 4356 of 2002

Appeal (civil) 4357 of 2002

PETITIONER:

PRADEEP ANAND

Vs.

RESPONDENT:

I.T.C.LTD. & ORS.

DATE OF JUDGMENT: 29/07/2002

BENCH:

D.P.MOHAPATRA & BRIJESH KUMAR.

JUDGMENT:

D.P.MOHAPATRA,J.

Leave granted in both the SLPs.

These appeals filed by Shri Pradeep Anand, son of

late Shri C.L.Anand are directed against the orders passed by the

High Court of Delhi on the interim application No.7558/98 in

OMPNo.197/98 by the learned single Judge and the order

passed by the Division Bench in FAO (OS) No.134/99 dismissing

the appeal. In the former order the learned single Judge granted

stay of further proceedings before the arbitrator appointed by the

International Chamber of Commerce in Arbitration Case

No.8080/BGD/OLG till decision of the objections to the award

dated 28.4.1998 rendered by the arbitrator in the matter. M/s.ITC

Ltd., a 'company' within the meaning of the Companies Act, 1956

is the main contesting party in the case.

On 11.9.1990 an agreement styled as 'co-operation

agreement' was made in Tokyo (Japan) between M/s.Toshiba

Corporation (hereinafter called 'Toshiba'), M/s.Toshiba Battery

Co. Ltd. (hereinafter called 'TABCL'), M/s.ITC Ltd.(hereinafter

called 'ITC') having its registered office at 37, Chowringhee,

Calcutta, M/s.Toshiba Anand Batteries Ltd. (hereinafter called

'Toshiba Anand') having its registered office at M.G.Road,

Ernakulam, Kerala and Shri C.L.Anand (hereinafter called 'Shri

Anand') representing his family and his associated companies.

The terms of the agreement were set out under Articles 1 to 12 of

the document. In Article 5 of the agreement the following

stipulation was made: "It is agreed to release all personal

guarantees given by Shri Anand and Shri Pradeep Anand to the

bankers and financial institutions on behalf of Toshiba Anand with

assistance and cooperation by ITC or its associates or by its

friends and/or by Toshiba and/or by TBCL as soon as possible

but not later than 31st March, 1991". Under Article 8 of the

agreement it was stipulated that "Shri Anand agrees that he will

not raise nor cause his associates including subsidiaries to raise

any claim against Toshiba and/or TBCL in any manner

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whatsoever in connection with his share transfer, his resignation

from Chairman of Toshiba Anand, or any other matter as

contemplated herein". Under Article 10 dealing with 'Specific

Performance' it was stipulated that :"The parties hereto shall be

entitled to specific performance of the terms of this Agreement

and their respective obligations including the use of their voting

right and also the exercise of their powers as set out in article 9 of

this Agreement." Article 11 in which was dealt with 'Duration' of

the agreement, it was stated :"(a)Toshiba Anand is wound up or

otherwise than for amalgamation or reconstruction approved by

the parties hereto, or (b) This agreement is terminated by mutual

agreement in writing of the parties hereto." In Article 12 of the

agreement certain general provisions were made. Clause (b)

thereof provided that :"Any unresolved dispute arising in

connection with this Agreement shall be settled under the Rules

of Conciliation and Arbitration of the International Chamber of

Commerce by one or more arbitrators appointed in accordance

with those rules and the arbitration shall be held at Bombay,

India. The award of the arbitrator(s) shall be final and binding

upon the parties hereto."

In course of implementation of the agreement certain

disputes arose between the parties particularly relating to release

of personal guarantees given by Shri Anand and Shri Pradeep

Anand as provided under Article 5 of the agreement. On the

application filed by Shri Anand the ICC appointed Mr.Datuk

George K.S.Seah as Arbitrator by the order dated 30th August,

1995. In course of the arbitration proceedings Shri Anand died

when the terms of reference had come into effect and before the

arbitration could be set down for hearing in Mumbai. The

Arbitrator allowed the application filed by Shri Pradeep Anand,

Son of the deceased to be substituted as claimant and to

continue with the arbitration proceedings. Vide an interim order

dated 20th March, 1997, ITC Ltd., Toshiba Corporation, TBCL and

Toshiba Anand were arraigned as defendants 1 to 4 respectively

in the arbitration proceedings. The arbitrator after considering the

case set out by the parties passed the partial award on 24th April,

1998 at Mumbai.

The terms of reference as quoted in the judgment of

the learned single Judge reads as follows :

"4.12. In the foregoing circumstances, the

Claimant prays the arbitral tribunal may be

pleased to take steps for settling the disputes

and make the undermentioned Award directing

the Defendants;

(a) Jointly and severally to take immediate

and appropriate steps to ensure that all

personal guarantees given by the Claimant

SHRI C.L.ANAND and his son, PRADEEP

ANAND to the Banks and Financial

Institutions are returned to the Claimant

duly discharged and cancelled;

(b) Alternatively to award to the Claimant the

amounts that he and his son, PRADEEP

ANAND are called upon to reimburse to

the Banks and Financial Institutions in

respect of the said personal guarantees;

(c) Alternatively, to hold the Defendants liable

for all losses and consequences arising to

the Claimant and his son, PRADEEP

ANAND, as a result of any legal actions

taken by the Banks and Financial

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Institutions pursuant to the personal

guarantees;

(d) To award costs of this Reference to

Arbitration, and

(e) Any other relief, as may be prayed for,

from time to time, in the circumstances of

the case."

Summarising his answers to the issues contained in Clause 13 of

the reference the Arbitrator in paragraph 54.1.1 stated as follows:-

54.2.1 Clause 13.1(a)

No

54.2.2 Clause 13.1(b)

Not applicable

54.2.3 Clause 13.2(a)(i)

Yes

54.2.4 Clause 13.2(a)(ii)

Yes

52.2.5 Clause 13.2(a)(iii)

No

54.2.6 Clause 13.2(a)(iv)

No

54.2.7 Clause 13.2(b)

Not applicable

54.2.8 Clause 13.3(a)

According to Claimant

54.2.9 Clause 13.3(b)

Not applicable

54.2.10 Clause 13.4(a)

No

54.2.11 Clause 13.4(b)

No

54.2.12 Clause 13.5(a)

Would not debar of estop

the 1st Defendant, ITC

Limited from raising the

same pleas, contentions or

defences before the

Arbitrator in this Reference.

54.2.13 Clause 13.5(b)

No

54.2.14 Clause 13.6(a)

Declaratory relief to the

Claimant for compensation

for breach of Article 5 of the

Co-operation Agreement

dated 11.09.1990 against

1st, 2nd and 3rd Defendants,

jointly and severally,

damages to be assessed.

54.2.15 Clause 13.6(b)

The Claimant, Shri

C.L.Anand was

representing his family

members and associated

companies when he signed

the Co-operation

Agreement dated

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11.09.1990 and also in this

Reference. The answer is

therefore Yes.

54.2.16 Clause 13.7(a)

No

54.2.17 Clause 13.7(b)

Only 1st Defendant, ITC

Limited committed breach of

Article 1 of the Co-operation

Agreement dated

11.09.1990. Claimant is

entitled to claim against 2nd

and 3rd Defendants,

Toshiba Corporation and

Toshiba Battery Company

Ltd. in this Reference under

Article 5 of the Co-operation

Agreement.

The Extracts from the Partial Award noted by the learned single

Judge read as follows :

50.11.2 Having regard to the abovenamed

factors I decline to order specific

performance in terms of clause 4.12(a)

of the Terms of Reference, in the

exercise of my discretion.

50.11.3 In my opinion, an Arbitrator should not

direct specific performance when the

contract was no longer in existence.

50.11.4 Another reason for refusing, specific

performance of clause 4.12(a) of the

TOR is that, if granted, it would indirectly

involve the Banks and Financial

Institutions to hand over the personal

guarantees to the Claimant duly

discharged and cancelled when both the

Banks and Financial Institutions have

not been made parties to this

Reference.

50.12.1 I now pass to consider clause 4.12(b) of

the TOR.

50.12.2 I am inclined to agree with the

contention of Counsel for ITC that this

relief claimed by the Claimant is

premature in as much as no court action

has been taken by the Banks and

Financial Institutions against the

Claimant and his son, SHRI PRADEEP

ANAND in respect of the said personal

guarantees.

50.12.3 In short, the Claimant is asking the

Arbitrator to make an award on matter

which did not exist yet.

50.12.4 For this reason I refuse to make an

award in terms of the relief claimed in

clause 4.12(b) of the TOR.

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50.13.1 I turn to deal with clause 4.12(c) of the

TOR and sub-section 2 of the section 21

of the Specific Relief Act of the 1963

may be relevant and it reads :

50.13.2 "21(1) In a suit for specific performance

of a contract, the plaintiff may also claim

compensation for its breach, either in

addition to, or in substitution of, such

performance.

(2) If, in any such suit, the court decides

that specific performance ought not to

be granted, but that there is a contract

between the parties which has been

broken by the defendant, and that the

plaintiff is entitled to compensation for

that breach, it shall award him such

compensation accordingly.

(3)

(4) In determining the amount of any

compensation awarded under this

section, the court shall be guided by the

principles specified in section 73 of the

Indian Contract Act 1872 (9 of 1872).

(5)

50.13.3 And section 73 of the 1872 Act is in the

following terms:

"When a contract has been broken, the

party who suffers by such breach is

entitled to receive, from the party who

has broken the contract, compensation

for any loss or damage caused to him

thereby, which naturally arose in the

usual course of things from such

breach, or which the parties knew, when

they made the contract, to be likely to

result from the breach of it.

50.13.4 Such compensation is not to be given

for any remote and indirect loss or

damage sustained by reason of the

breach.

50.14.1 Counsel for ITC has further argues that

section 73 of the Contract Act 1872

imposes on the Claimant a duty of

taking all reasonable steps to mitigate

the loss consequent on the breach of

contract and debars the Claimant from

claiming any part of the damage which

is due to his neglect to take such steps.

50.14.2 Counsel also submits that it is well

settled that the loss to be ascertained is

the loss as on the date of the breach

(see KAS Jamal Vs.Moolla Dawood

Sons & Co. (1915) AC 175) in terms of

Article 5 of the Co-operation Agreement

dated 11.09.1990 the personal

guarantees given by the Claimant and

his son, Shri Pradeep Anand to the

Banks and Financial Institutions were

required to be discharged by

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31.03.1991.

50.15.1 I have already held and adjudged based

on the documents produced before me

in this Reference ITC had committed a

breach of Article 5 of the Co-operation

Agreement dated 11.09.1990 in that ITC

had failed to arrange for the release of

all Personal guarantees given by Shri

C.L.Anand and his son, Shri Pradeep

Anand to the Banks and Financial

Institutions on behalf of TOSHIBA

ANAND BATTERIES LTD. (TABL) as

agreed.

50.15.2 And I have also held and adjudged that

ITC had refused to assist and co-

operate with the release of the said

personal guarantees when the

Consortium Banks proposed that ITC

gave corporate guarantee instead in

order to secure the discharge of the said

personal guarantees given by Shri

C.L.Anand and his son, Shri Pradeep

Anand to the said Banks.

50.16.1 In my opinion, the appropriate relief to

be awarded to the Claimant for breach

of Article 5 of the Co-operation

Agreement dated 11.09.1990 is for

compensation for breach of contract,

with damages to be assessed under

section 21(2) of the Indian Specific

Relief Act, 1963.

50.16.2 I hereby reserve powers to make a Final

Award on the quantum of monetary

compensation (if any) to be awarded to

the Claimant after having invited and

received further submissions from the

parties and/or their Counsel in this

regard at a later date.

50.17.1 Since ITC, TOSHIBA and TABL had

agreed under Article 5 of the said Co-

operation Agreement to assist and Co-

operate to release all personal

guarantees given by Shri C.L.Anand

and his son, Shri Pradeep Anand to the

Banks on behalf of TOSHIBA ANAND

BATTERIES LTD. (TABL) in my opinion,

it is fair and equitable that all three

parties should be held jointly and

severally, liable to the Claimant. I have

therefore so held and adjudged.

50.70.2 To avoid any doubt I have to make it

clear that I am granting to the Claimant

declaration relief under clause 4.12(c) of

the Terms of Reference for breach of

Article 5 of the Co-operation Agreement

dated 11.09.1990. The relief is for

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compensation for breach of contract,

with damages to be assessed under

section 21(2) of the Indian Specific

Relief Act, 1963 at a later date."

On receipt of the notice of the Award made by the arbitrator ITC

Ltd. (respondent no.1 herein) filed a suit, Suit No.1084-A of 1998

under Section 14 of the Arbitration Act, 1940 (hereinafter referred

to as 'the Act') for a direction to the arbitrator (respondent no.5

herein) and ICC (respondent no.6 herein) to file the Award (partial

Award) dated 24.4.1998 in ICC arbitration Case and on 1.8.1998

filed an application for stay of the arbitration proceedings.

Considering the application for stay in IA No.3658 of

1997 in OMP No.10 of 1996 filed by Toshiba (respondent no.2

herein) and TBCL (respondent no.3 herein), the learned single

Judge passed the order to the effect that though the arbitration

proceedings may go on no final award shall be passed till the

next date of hearing which was fixed on 16th July, 1998. Against

the said order the appellant moved the Division Bench an appeal,

FAO (OS) No.146 of 1998 in which the Division Bench vide order

dated 29.5.1998 granted stay of operation of the order dated

22.5.1998. The said order was disposed of by a consent order on

22.7.1998 to the effect that the final award may be passed but the

same shall not be implemented till the disposal of the I.A. filed by

respondents 2 and 3 which was pending before the learned

single Judge. The arbitrator on being informed about the order

passed by the Division Bench proceeded further in the arbitration

proceedings and called upon the parties to send their witness

statements, documentary evidence etc.

While Suit No.1084-A of 1998 filed by respondent

no.1 was pending the said respondent filed OMP No.197 of 1998

under Sections 30 and 33 of the Act inter alia challenging the

legality and validity of the 'Co-operation Agreement' dated

11.9.1990. Both the suit and the OMP are pending before the

High Court. It is relevant to note here that previously when the

ICC had decided that the arbitration shall be conducted by the

sole arbitrator but the arbitrator had not entered upon the

reference, the respondent no.1 had filed Suit No.50 of 1995 and

OMP No.16 of 1995 in the Delhi High Court challenging the

legality and validity of the 'Co-operation Agreement' dated

11.9.1990 as well as the legality and validity of the arbitration

clause in the said agreement and had prayed for a declaration

that the same were illegal and null and void. Respondent no.1

had sought stay of further proceedings in the petition OMP No.16

of 1995. When Suit No.50 of 1995 and OMP No.16 of 1995 were

pending for trial the respondent no.1 filed an application under

Order 23 Rule 1 of the Code of Civil Procedure, unconditionally

withdrawing the said two proceedings. By the order dated

17.10.1995 passed by the High Court the suit and the OMP were

dismissed as withdrawn. The respondent no.1 also filed IA

No.7558 of 1998 seeking stay of further arbitration proceedings

alleging certain illegalities in the procedure followed by the

arbitrator which, according to it had vitiated the award passed by

the arbitrator. The respondent no.1 also questioned the

jurisdiction of the arbitrator to award monetary compensation in

the case in favour of the appellant. The validity of the Co-

operation Agreement was also challenged by the said

respondent. The appellant herein refuted the allegations and

contentions raised on behalf of the respondent no.1 in the

counter affidavit.

The learned single Judge after hearing the counsel

appearing for the parties and considering the contentions raised

on their behalf took the view that the validity of the impugned

partial award should first be decided and only after it was found

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to be in order and valid, further proceedings for making the final

award be undertaken. In support of the view the learned Judge

noted that according to him the petitioner had prima facie case

as, prima facie, the grounds of challenge to the impugned partial

award were not, on the face of the same, devoid of merits; rather

the same appeared to have substance and were required to be

heard and decided in proper proceedings.

Thereafter the learned Judge proceeded to give

reasons in support of his finding that the balance of convenience

lies in favour of the respondent no.1 herein. It appears from

the discussions in the order the learned Judge took exception as

the arbitrator had not filed the partial award in court promptly

despite a direction by the court and proceeded to quantify the

damages on the basis of the partial award in which a declaratory

order was made. From this the learned single Judge inferred that

the respondent no.1 was rendered remediless and thus gagged.

However, the learned Judge himself observed in the order:

"However, the situation has changed because before the

application under consideration for stay could be decided, the

Arbitrator filed the award in S.No.1084A/98, though very late, and

also authorised the petitioner to file its copy on his behalf." The

learned single Judge has discussed in detail the merits of the

partial award; the further steps being taken by the arbitrator in the

proceeding for quantification of damages; inconvenience likely to

be created to the respondent no.1 if the proceeding continued

since he will have to bear the burden of expenditure, passed the

order of stay on following terms :

"Thus after having found prima facie case and

the balance of convenience in favour of the

petitioner and also having come to a prima

facie view that presently respondent no.1 is

not going to be prejudiced by grant of stay, I

allow the application and direct that further

arbitration proceedings for making final award

shall remain stayed till the impugned partial

award is made rule of the Court.

Before parting with the order, it is made

clear that any observations made in this order

shall not affect the merits of the respective

contentions of the parties relating to the

impugned partial award dated 24.4.1998."

Being aggrieved by the stay order passed by the

learned single Judge, the appellant filed the appeal FAO (OS)

No.134/99 which was decided by a Division Bench of the High

Court vide the judgment dated 13th March, 2000. From the

discussions in the judgment it is clear that the Division Bench,

considering the contention raised on behalf of the respondents

against maintainability of the petition for stay filed before the

learned single Judge and the appeal assailing the stay order,

opined that the application for stay was maintainable and the

order passed on the application was an order under the

Arbitration Act ( 'the Act' for short). Regarding the question of

maintainability of the appeal the Division Bench held that the

order under challenge being not one of the orders specified in

Section 39 of the Act the appeal was not maintainable. The

Division Bench further observed that having held the appeal to be

not maintainable it was not necessary for the Court to go into the

questions as to whether the learned single Judge was right in

passing the order staying the proceedings before the arbitrator;

however, as the matter was fully argued by the parties the

Division Bench proceeded to consider the matter on merits. In

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that regard the Division Bench made the following observations :

"It is not in dispute that the Arbitrator had

written a letter on 21st November, 1997

informing the parties that he had prepared the

draft final Award and sent the same to the ICC

International Court for its scrutiny. It is also

not in dispute that the Secretariat of the ICC in

its letter dated 5th February, 1998 had

informed the parties that the draft final Award

was under the scrutiny process of the ICC

Court of Arbitration. It is also not in dispute

that ultimately the Award which was sent to

the parties was described as a partial Award.

The question, therefore, naturally coming to

the mind of the court is how the draft final

Award prepared by the Arbitrator and sent to

the ICC Court of Arbitration was changed to

partial Award. The other question which

comes to the mind of the Court is as to how

and under which provision of law the Arbitrator

can send the Award for scrutiny or approval to

another forum which has nothing to do with

Arbitration. It is admitted between the parties

that Indian laws were applicable to the

Arbitration proceedings. It is well settled that

under the Indian laws the Award of the

Arbitrator leaving a matter in dispute to be

decided by a third person is invalid as it is not

open to the Arbitrators to delegate their

authority to a stranger. Even a partial

delegation of authority vitiates the Award if the

defective part cannot be separated from the

rest. Delegation of his authority and functions

by an Arbitrator amounts to judicial

misconduct. Such an Award suffers for a

serious infirmity and as such is liable to be set

aside. In this case, it is not denied that the

Arbitrator did send the Award for scrutiny to

the International Court of Arbitration.

In our view, therefore, prima facie, it

appears to us that the whole approach of the

Arbitrator in sending the Award to the ICC

Court of Arbitration amounted to delegation of

authority to a third party. Prima facie, the

Award is suffering from serious infirmity. At

the time of deciding this Application for stay, it

cannot be said whether or not the Arbitrator

has committed mis-conduct by sending the

Award to a third party. It may also not be

possible for this Court to decide at this stage

as to how and in what circumstances the final

Award was changed to a partial Award. There

is nothing before the Court also to find out as

to what was written in the draft final Award

sent to the International Court of Arbitration for

scrutiny and to what extent this draft final

Award was changed so as to be described as

a partial Award. All these questions have to

be gone into during the hearing of the main

petition."

Proceeding further the Division Bench also took exception to the

conduct of the arbitrator in not filing the depositions and

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documents before the Court on the ground of confidentiality and

claim of privilege. The Division Bench observed:

"The objections filed by the ITC to the Award

described as a partial Award cannot be

decided without such deposition and

documents before the Court. It is, therefore,

but natural that it was incumbent upon the

Arbitrator to file the same on being so required

either by the parties or by the Court. Non-filing

of the depositions and documents and

claiming privilege and confidentiality about the

same, prima facie, show that the Arbitrator is

being influenced by the opinion of a third party,

may be in the present case the International

Court of Arbitration. That being the position, in

our view, the Arbitrator could not be permitted

to continue with the Arbitration proceedings till

such time the objections to the partial Award

were decided by the Court. In our opinion,

therefore, there was a prima facie case for the

stay of further proceedings before the

Arbitrator. We are, therefore, in complete

agreement with the view of the learned Single

Judge that in the interest of justice, further

proceedings before the Arbitrator should be

stayed."

Finally, the Division Bench dismissed the appeal holding that it

was devoid of merit and clarified that any observation made in the

order shall not have any bearing on the merits of the objections

under Sections 30, 31 and 33 of the Act pending before the

learned Single Judge.

From the discussions made in the foregoing

paragraphs, it is manifest that the disputes raised in the

proceeding arises from and relates to the Cooperation Agreement

dated 11.9.1990 entered into between the parties. In the said

agreement it was agreed by the parties under Article 12 that 'any

unresolved dispute' arising in connection with this Agreement

shall be settled under the Rules of Conciliation and Arbitration of

the International Chamber of Commerce by one or more

arbitrators appointed in accordance with those rules and the

arbitration shall be held at Bombay, India. The arbitration

proceeding was initiated in pursuance of the express provision

made in the agreement and the arbitrator was appointed by the

ICC under the stipulation in the agreement. On the materials on

record the position has to be accepted, prima facie, that the

Indian law is applicable to the proceeding. The proceeding is to

be conducted and decided in accordance with the provisions of

the Arbitration Act, 1940. We make it clear that our observation

in this regard will not prevent any of the parties to raise the

question, at the appropriate stage of the proceedings before the

Court and if such contention is raised the Court will decide the

same in accordance with law. The Arbitration Act, 1940 is fairly

comprehensive and contains provisions from the stage of

appointment of arbitrator till the award being made rule of the

Court where after it becomes a decree of the Court and

executable as such. In Section 34 of the Act power is vested in

the Court to order stay of legal proceedings, where there is an

arbitration agreement therein. It is laid down therein that :

"Where any party to an arbitration agreement

or any person claiming under him commences

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any legal proceedings against any other party

to the agreement or any person claiming under

him in respect of any matter agreed to be

referred, any party to such legal proceedings

may at any time before filing a written

statement or taking any other steps in the

proceedings, apply to the judicial authority

before which the proceedings are pending to

stay the proceedings; and if satisfied that there

is no sufficient reason why the matter should

not be referred in accordance with the

arbitration agreement and that the applicant

was, at the time when the proceedings were

commenced, and still remains, ready and

willing to do all things necessary to the proper

conduct of the arbitration, such authority may

make an order staying the proceedings."

From the provision in the section it is clear that in case there is an

arbitration agreement entered between the parties, they should

ordinarily be held by their agreement and should not be permitted

to initiate any legal proceeding other than arbitration proceeding

relating to any dispute coming within the arbitration clause. This

principle was taken note of by this Court in Uttar Pradesh Co-

operative Federation Ltd. vs. M/s.Sunder Brothers of Delhi, 1966

Supp. SCR 215, in which it was observed inter alia that :

"It is, of course, the normal duty of the court to

hold the parties to the contract and to make

them present their disputes to the forum of

their choice, but the strict principle of sanctity

of contract is subject to the discretion of the

Court under s.34 of the Indian Arbitration Act.

A party may be released from the bargain if he

can show that the selected arbitrator is likely to

show bias or there is sufficient reason to

suspect that he will act unfairly or that he has

been guilty of unreasonable conduct."

This position is also clear from the provision in Section 18 of the

Act in which it is laid down inter alia that :

"Power of Court to pass interim orders

(1)Notwithstanding anything contained in

Section 17, at any time after the filing of the

award, whether notice of the filing has been

served or not, upon being satisfied by affidavit

or otherwise that a party has taken or is about

to take steps to defeat, delay or obstruct the

execution of any decree that may be passed

upon the award, or that speedy execution of

the award is just and necessary, the Court

may pass such interim orders as it deems

necessary.

(2)Any person against whom such interim

orders have been passed may show cause

against such orders, and the Court, after

hearing the parties, may pass such further

orders as it deems necessary, and just. "

These provisions, in our view show that the legislative policy is to

ensure proper enforcement of an arbitration award and to assist a

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party who apprehends that he may face serious difficulties in

execution of the award passed in his favour on account of the

conduct of the other party. Be it noted here that different

provisions of the arbitration Act leaves little scope for doubt that

an arbitration proceeding is to be conducted by the arbitrator with

reasonable dispatch and after the award is passed the Court

should also dispose of the proceedings and decide the question

whether the award should be made a rule of Court expeditiously

so that the party in whose favour the award has been passed

gets the benefit of the arbitration clause. In the present case the

order passed by the learned single Judge gives rise to a

converse situation. The Court has intervened to stay further

proceedings in a proceeding which is continuing before the

arbitrator giving the reason inter alia that the petitioner applying

for stay may be put to unnecessary expenses in defending the

proceeding before the arbitrator. As noted earlier, the respondent

no.1 herein, has initiated proceedings before the Court to direct

the arbitrator to file the Partial Award and has also filed an

application under Sections 30 and 33 of the Act challenging the

validity of the award and has also raised the question of validity of

the agreement itself in the petition. The said proceedings are

pending in the Court. The questions raised therein will be

decided by the Court on merit after hearing the parties. In such

circumstances, the view taken by the High Court that the

arbitrator should not proceed further in the arbitration proceeding

is unnecessary, uncalled for and erroneous. The observation of

the learned single Judge that 'since the arbitrator did not file the

Partial Award in Court immediately on being directed by the Court

the respondent no.1 was made remediless and was 'gagged', is

equally uncalled for and erroneous. It may be noted here that no

party will be entitled to get any benefit in any final award passed

by the arbitrator until the same is made rule of the Court and

before this is done the Court is duty-bound to give notice to the

parties and consider objections if any raised by any of the parties

against the award.

On perusal of the judgment/order passed by the learned

single Judge, we are constrained to observe that the learned

Judge travelled beyond the limited jurisdiction vested in him in

deciding the question of stay and has discussed the merits of the

case and made observations which may prejudice the parties of

any of them in a proceeding before the arbitrator and at

subsequent stages in the proceeding before the Court.

The judgment of the Division Bench, we are

constrained to observe, suffers from similar error of approach as

the learned Single Judge. Being aware of the position that the

respondent no.1 has challenged the partial Award by filing

objections under Sections 30, 31 and 33 of the Act and

proceeding is pending before the trial Court, the Division Bench

thought it appropriate to make observations regarding the alleged

misconduct of the Arbitrator in sending the draft Award to the ICC

International Court of Arbitration for advise and also in declining

to send up the depositions and the documents to the Court on

certain grounds the Division Bench appears to have lost sight of

the fact that all these questions may come up for decision before

the trial Court in the proceeding under Sections 30 and 33 of the

Act and parties will have opportunity to have their say in the

matter. The Division Bench failed to appreciate that in the

context of facts of the case it is in the interest of the parties that

the Arbitration proceeding should be concluded and the challenge

against the draft Award/final Award should be decided as

expeditiously as possible. The observations made by the

Division bench in the judgment are not only unnecessary but also

uncalled for keeping gin view the limited question that came up

for consideration before it i.e. whether the further proceeding

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before the Arbitrator should be stayed or it should continue. Any

observation touching upon the merits of the case particularly, the

allegations relating to alleged misconduct of the Arbitrator at the

stage of consideration of the application for interim order of stay

does not commend us. It appears from the record that the

respondent no.1 has also filed an application before the Court for

removal of the Arbitrator and the same is also pending. We are

conscious of the position that grant of stay is a matter of

discretion of the Court and if the Trial Court on consideration

passes the order of stay the Appellate Court should be slow to

interfere with the same. But that does not mean that if the order

of stay passed by the Trial Court is based on non-judicial

consideration such order is not liable to be interfered with by the

Appellate Court. However, since the Division Bench held that the

appeal was not maintainable we need say no further on merits of

the observations/findings in the judgment.

On consideration of the entire matter, we are not persuaded

to maintain the order granting stay of further proceedings before the

arbitrator passed by the learned single Judge, which was confirmed in

appeal by the Division Bench. The judgment/order dated 22.4.1999

passed by the learned single Judge which was confirmed by the Division

Bench in the judgment/order dated 13th March, 2000 in FAO (OS)

No.134 of 1999 are set aside and accordingly, the appeals are allowed

with costs. Hearing fee is assessed at Rs.25,000/-.