For an appeal to be maintained under section 37 Arbitration and Conciliation Act, 1996, an arbitral award under section 34 must be refused or set aside: Bombay High Court
Section 37 (1) (c) of the Arbitration and Conciliation act,1996 mentions that for an order to be appealed under section 37, the award granted under section 34 must be refused or set aside. However, If the amendment application for the ground to challenge the refusal of the counterclaim is dismissed, it is not that the petition filed to challenge the entire award comes to an end and thus will not be maintainable under section 37. This was decreed by the two-judge bench comprising of Hon’ble Justice Nitin Jamdar and Hon’ble Justice C.V. Bhadang in Oil &amp; Natural Gas Corporation Ltd. Vs. Sime Darby Engineering Sdn. Bhd. And Swiber Offshore Construction Pte. Ltd. [COMMERCIAL APPEAL NO. 55 OF 2020]. The brief facts of the case are, the appellant ONGC issued a tender on 29th may 2009 for an independent project. On 19 May 2010, the tender was awarded to the respondents. An agreement between the parties was executed on 3rd July 2010 pursuant to the same. However, a dispute arose between the parties and the arbitration clause was invoked and an arbitral tribunal was set up. Th tribunal held the appellant liable to pay the respondent for the settlement of rival claims. Aggrieved by this, the appellant filed an arbitration petition and a year later took out chamber summons to amend this petition and add grounds to challenge the award. The respondents contested such a chamber summons. The grounds were categorized into elaboration of the existing grounds and additional grounds. The learned judge allowed the elaboration of the existing grounds but decreed that the additional grounds cannot be included due to the expiry of the period of limitation. Challenging this order, the present appeal is filed before the Hon’ble High Court claiming that, the additional grounds must also be allowed to be included. The counsel for the respondents challenged the maintainability of the present appeal under section 37 of the act. They submitted that asper section 37 (1) (c) of the act, only those orders whose awards are set aside or there is a refusal to set aside under section 34 of the act can be appealed before the court. However, the counsel for the respondent submitted that the award under section 34 was set aside due to a delay and thus will be maintainable under section 37 for an appeal before the Hon’ble court. To support this claim, the counsel for the appellant made use of the Effect test to ascertain whether the appeal is maintainable under Section 37(1) (c) of the Act. According to the Appellant, what needs to be seen is the effect of the order to decide whether an appeal under Section 37 is maintainable.
 on 05 07 2021 on 06 07 skn 1 COMAPP 55.2020.docIN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTIONCOMMERCIAL APPEAL NO. 55 OF 2020INCHAMBER SUMMONSNO. 445 OF 2019INCOMMERCIAL ARBITRATION PETITION NO. 437 OF 2018Oil & Natural Gas Corporation Ltd.A public sector undertaking incorporated under Companies Act 1956 having its RegisteredOffice at 5 Nelson Mandela Marg Vasant Kunj New Delhi 110 070.Mumbai Region Civil Construction Section through CE(C) I C IEIT Building Ground Floor ONGS Complex Phase I Panvel 410 221.…Appellant.V s.A Consortium of Sime Darby EngineeringSdn. Bhd. a company established and registered under the Laws of Malaysia having its registered office at Mezzanine Floor Kompleks Sime Darby Persiaran Kewajipan USJ 7 47600 Subang Jaya Selangor Darul Ehsan Malaysia.And Swiber Offshore Construction Pte. Ltd. a company established and registered under the Laws o Singapore having its principal office at 12 International Business Park Cyberhub @ IBP #04 01 to 04 Singapore 609920.…Respondent. on 05 07 2021 on 06 07 skn 2 COMAPP 55.2020.docMr.Zubin Behramkamdin with Mr.Rohit Gupta Nishit Dhruva Prakash Shinde Khushbu Chhajed and Abhishek Bhavsar i b. MDP & Partners for the Appellant.Mr.Kevic Setalvad Senior Advocate with Ms.Renu Gupta Ms.Sushma Nagaraj Ms.Kinjal Patel and Ms.Vibhuti Kenyfor the Respondent.CORAM :NITIN JAMDAR ANDC. V. BHADANG JJ.(Through Video Conferencing)DATE :3 July 2021.JUDGMENT :(Per Nitin Jamdar J.)The Appellant Oil & Natural Gas Corporation Ltd. hasfiled a Commercial Arbitration Petition under Section 34 of theArbitration and Conciliation Act 1996 before the learned SingleJudge challenging the arbitral award rendered against the Appellant.In this petition the Appellant took out a chamber summon toamend the original petition. By the impugned order the learnedSingle Judge granted some amendments and rejected the otheramendments. The Appellant by this appeal has challenged theorder of the learned Single Judge rejecting the amendments.2.Preliminary objection is taken by the Respondent to themaintainability of the appeal. To consider the preliminary objection a brief narration of facts is necessary and it is as follows: on 05 07 2021 on 06 07 skn 3 COMAPP 55.2020.doc3.The Appellant ONGC issued a tender on 29 May 2009for the work ‘The construction and commissioning for entirefacilities of one well cum process platform with living quarters cumpower generation cum water injection on an independent jacket.’On 19 May 2010 the tender was awarded to the Respondents forworks amounting to USD 618376022 . Pursuant to the same anagreement was executed between the parties on 3 July 2010. Adispute arose between the parties regarding the said contract. TheRespondents invoked an arbitration clause and issued notice on 1June 2016 by appointing an arbitrator and called upon the Appellantto appoint its arbitrator. An arbitral tribunal was then constituted.The parties filed their pleadings. The Appellant filed counterclaims.The arbitral tribunal heard the parties and delivered the majorityaward on 22 March 2018. The Appellant was held liable to pay theRespondent a sum of USD 5127915.40in fulland final settlement of rival claims. Interest at 14% per annum fromthe award till payment was granted. Most of the counterclaims wererejected.4.Being aggrieved by the Award the Appellant filedArbitration Petition No.437 2018 on 26 March 2018. On 25March 2019 the Appellant took out Chamber SummonsNo.445 2019 to amend the Arbitration Petition and add grounds tochallenge the Award. The schedule of amendments contained variousgrounds to be added. The Respondent filed its reply to the chambersummons and contested the chamber summons. The learned on 05 07 2021 on 06 07 skn 4 COMAPP 55.2020.docSingle Judge grouped the amendments into three categories. First the grounds R to TTpertaining to the challenge to thecounterclaim of the Appellant being rejected by the Arbitrators.The second grounds SS to WW and III elaborated the existinggrounds of challenge regarding the delay and liquidated damages.The third pertaining to various individual claims not raised duringthe contract work but were claimed as additional work. 5.After noting the law on the subject regarding amendments more particularly amendments to the arbitration petition filed underSection 34 of the Act of 1996 the learned Single Judge opined thatthe grounds in the elaboration of existing grounds i.e. the secondcategory of grounds need to be granted. As for the third category the learned Single Judge observed that these grounds were additionalgrounds of challenge and could not have been taken up after theexpiry of the period of limitation. So far as the first category ofgrounds the learned Single Judge observed that in respect of thecounterclaim there are new grounds and would introduce a newclaim or cause of action and no circumstances exist why anexception should be made in an ordinary rule of not grantingamendments after the period of limitation. The learned SingleJudge thus by the impugned order dated 28 August 2019 grantedsome of the amendments and rejected the others as above. 6.This order is under challenge before us in the presentappeal. According to the Appellant the chamber summons ought to on 05 07 2021 on 06 07 skn 5 COMAPP 55.2020.dochave been allowed in entirety. A preliminary objection is taken bythe Respondent to the maintainability of the appeal contending thatthe appeal does not fall within the ambit of Section 37 of the Act of19967.We have heard Mr.Zubin Behramkamdin learnedAdvocate for the Appellant and Mr.Kevic Setalvad learned SeniorAdvocate for the Respondent.8.According to the Respondents only those orders that fallwithin the ambit of Section 37 of the Act of 1996 can be challengedin appeal. On the other hand it is the case of the Appellant that therejection of chamber summons in the present circumstances fallswithin the ambit of Section 37(1)(c) of the Act.9.Section 37 of the Act reads as under:37. Appealable orders.—Notwithstanding anythingcontained in any other law for the time being in force anappeal shall lie from the following ordersrefusing to refer the parties to arbitration undersection 8granting or refusing to grant any measure undersection 9setting aside or refusing to set aside an arbitralaward under section 34.(2) An appeal shall also lie to a Court from an ordergranting of the arbitral tribunal.— on 05 07 2021 on 06 07 skn 6 COMAPP 55.2020.doc(a) accepting the plea referred in sub sectionor sub sectionof section 16 or(b) granting or refusing to grant an interim measureunder section 17.(3) No second appeal shall lie from any order passed inappeal under this section but nothing in this section shallaffect or take away any right to appeal to the Supreme Court.(emphasis supplied)10.The position of law that only those appeals challenging theorders specified under Section 37 of the Act can be filed underSection 37 is now settled. The Apex Court in the case of KandlaExport Corporation v. OCI Corporation1 held that an appeal shalllie from such orders passed by the Commercial Division of the HighCourt that are specifically enumerated under Order 43 of the Codeof Civil Procedure Code 1908 and Section 37 of the Arbitration Actand appeals mentioned in Section 37 of the Arbitration Act alone areappeals that can be made to the Commercial Appellate Division ofthe High Court. The Division Bench of this Court in KakadeConstruction Company Ltd. v. Vistra ITCLLtd.2 hasfollowed the decision in Kandla Export Corporation to hold thatonly those orders specified in Section 37 can be a subject matter ofappeal under Section 37 of the Act.11.The Respondent in support of its preliminary objection relies upon the decision of the Division Bench of this Court in the1(2018) 14 SCC 71522019 SCC Online Bom 1521 :6 Bom CR 805 on 05 07 2021 on 06 07 skn 7 COMAPP 55.2020.doccase of Raghuvir Cotton Ginning and Pressing Pvt.Ltd. v. VijayCotton and Fibre Co.3 It is contended that the Division bench hascategorically held that no appeal under Section 37 of the Act of 1996is maintainable from the order rejecting the application foramendment. In this case the Division Bench considered the appealfiled under Section 37 of the Act challenging the order dismissingthe chamber summons for amendment of arbitration petition filedunder Section 34 of the Act. An argument was advanced by theappellant therein based on the Apex Court s decision in the case ofState of Maharashtra v. Hindustan Construction Company Ltd.4 thatthe application for amendment of the arbitration petition to betreated as a new application and the rejection thereof would finallyreject the ground under Section 34. The Division Bench however dismissed the appeal as not maintainable. According to theAppellant the Division Bench has not addressed the argumentsbased on the Apex Court decision in Hindustan Construction. 12.The Respondent in furtherance of the preliminaryobjection has also relied upon the decision of the Supreme Court inthe case of BGS SGS Soma JV v. NHPC Ltd.5 In this case theSpecial Commercial Court Gurugram had returned the petitionfiled under Section 34 for presentation to a proper court. This orderwas challenged before the High Court of Punjab and Haryana atChandigarh which held that the appeal under Section 37 wasmaintainable and allowed the same and set aside the order passed by32017 CC Online Bom 76 :5 Mah LJ 3524(2010) 4 SCC 518 : AIR 2010 SC 12995(2020) 4 SCC 234 on 05 07 2021 on 06 07 skn 8 COMAPP 55.2020.docthe Commercial Court. The Bench of three learned judges of theSupreme Court considered a challenge to the order passed by theHigh Court. The Appellant before the Supreme Court argued thatbesides the merits of the matter the appeal before the High Courtwas not maintainable. The Supreme Court observed that there is noindependent right of appeal under Section 13(1) of the CommercialCourts Act 2015 which merely provides the forum for filingappeals. The parameters of Section 37 of the Act 1996 alone haveto be looked into. Appeals shall lie under Section 37(1) only fromthe orders referred in sub clauses(b) andand from no others.The Supreme Court held that where a Section 34 Petition is orderedto be returned to the appropriate Court such order would notamount to an order refusing to set aside an arbitral award underSection 34. It was held that the refusal to set aside an arbitral awardmust be after the grounds set out in Section 34 have been applied tothe arbitral award and after the Court has turned down such grounds.Though the Appellant has sought to distinguish this decision onfacts the Apex Court s observations in BGS SGS Soma cannot berestricted to the facts of the case alone. The Apex Court has clearlyheld that “the refusal to set aside an arbitral award” under Section37(1)of the Act must be after the grounds set out in Section 34of the Act of 1996 have been applied to the arbitral award inquestion and after the Court has turned down such grounds that anappeal under Section 37 of the Act of 1996 would be maintainable.13.The Division Bench of the Delhi High Court in the case of on 05 07 2021 on 06 07 skn 9 COMAPP 55.2020.docHarmanprit Singh Sidhu v. Arcadia Shares and Stock Brokers Pvt.Ltd.6 considered the challenge to the order passed by the SingleJudge of the Court allowing the application for condonation of delayand condoning the delay of 55 days in filing the petition underSection 34 of the Act. The Division Bench dismissed the appealunder Section 37 of the Act holding that the impugned order did notfall within the category of appealable orders specified in Section37(1) of the Act of 1996.14.The Appellant in support of its contention that thepresent appeal is maintainable under Section 37(1)(c) of the Act of1996 has relied upon the decision of the Supreme Court in the caseof Chintels India Ltd. v. Bhayana Builders Ltd.7 Here a conversesituation of the court refusing to condone the delay in filing thepetition under Section 34 of the Act was under consideration. Inthis case the Division Bench of Delhi High Court dismissed theappeal under Section 37 of the Act filed against the order passed bythe learned Single Judge refusing to condone the delay in filing apetition under Section 34 of the Act. The respondent before theApex Court argued that Section 37(1)(c) is clear and the refusal toset aside an award has to be only on merits and not on a preliminaryground. The Apex Court invoked the Effect test and observed thatthe Effect test is part and parcel of the statutory provision for appealunder Section 37 of the Act and it is an express language of Section37(1)(c). The Supreme Court observed that the effect of the order62016DRJ 51472021 SCC Online SC 80 on 05 07 2021 on 06 07 skn 10 COMAPP 55.2020.docdismissing the application for condonation of delay is that theapplication under Section 34 comes to an end. Observing this theSupreme Court allowed the appeal holding that the appeal underSection 37(1)(c) would be maintainable against the order refusing tocondone the delay in filing a petition under 34 of the Act.15.Based on the decision of the Supreme Court in ChintelsIndia the Appellant contended that Court must apply the Effect Testto ascertain whether the appeal is maintainable under Section 37(1)(c) of the Act. According to the Appellant what needs to be seen isthe effect of the order to decide whether an appeal under Section 37is maintainable. It is contended that the effect of rejection of theamendment more particularly regarding the challenge to the refusalof the counterclaim is that case of the Appellant in that regard standsclosed. The Appellant submits that by rejecting the amendment tochallenge the Arbitrator’s refusal to grant counterclaim thischallenge is now foreclosed. The Appellant contends that since thisground cannot be taken before the learned single judge it is a refusalto set aside the award as per Section 37(1)(c) of the Act. ThePetitioner contends that the Supreme Court in HindustanConstruction has held that since an application for amendment of aPetition under Section 34 beyond the period of limitation wouldamount to a new application rejection of such ‘new application’amounts refusing to set aside the award as per Section 37(1)(c) of theAct. It is submitted that Section 37 needs to be construedaccordingly. on 05 07 2021 on 06 07 skn 11 COMAPP 55.2020.doc16.According to us the dicta laid down in Chintels India willnot assist the Appellant in the facts of this case. The effect of refusingto condone delay for filing a petition under Section 34 is that there isa refusal to set aside the award in its entirety and as a consequence the petition under Section 34 also gets dismissed. This position isentirely different from the rejection of an amendment.17.The Appellant s argument that by rejecting theamendment to challenge the arbitrator’s refusal to grant thecounterclaim of the Appellant this challenge is now foreclosed isbased on a misconception. Even if these grounds are taken andaccepted it will not lead to the grant of counterclaim in the petitionunder Section 34 of the Act of 1996. The only consequence will bethat the entire award will be set aside. The rejection of anamendment to challenge the finding regarding non grant ofcounterclaim will only mean that the Single Judge will not permitthis as a ground to challenge the award. If the amendmentapplication for the ground to challenge the refusal of thecounterclaim is dismissed it is not that the petition filed to challengethe entire award comes to an end. The challenge on the othergrounds would continue and if the Appellant succeeds on thosegrounds the award can be set aside.18.The learned counsel for the Respondents pointed out thatthe learned Single Judge has not rejected the amendment regarding on 05 07 2021 on 06 07 skn 12 COMAPP 55.2020.docthe challenge to the rejection of counterclaim on the ground oflimitation alone but has observed that there will be no exceptionalcircumstances to deviate from the standard rule.19.The argument of the Appellant on the maintainability ofthe appeal and on the merits of the challenge is contradictory. TheAppellant s case on maintainability is that since the groundchallenging refusal to grant counter claim is not allowed to be taken the challenge ends. However when asked as to what is the challengeon merits it was contended that denial of counterclaim and grant ofclaim against the Appellant is a composite award and once the awardis challenged in entirety the amendment was only regarding a pre existing challenge. 20.The legal position emerging from the plain language ofSection 34 of the Act of 1996 is that there should be setting aside orrefusal to set aside the award under Section 34 for the appeal to lieunder Section 37(1)(c) of the Act. There is a difference betweenrefusing an amendment to take a ground of challenge and rejectingthe entire petition finally under Section 34. The Appellant is mixingup the concepts. The observation of the Apex Court in HindustanConstruction in the context of not allowing the new or freshchallenge after the period of limitation does not mean that under theAct there are multiple petitions under Section 34. The petitionunder Section 34 is only one. Section 37(1)(c) makes it clear thatwhen the Court finally allows or refuses to set aside the award under on 05 07 2021 on 06 07 skn 13 COMAPP 55.2020.docSection 34 of the Act that an appeal is maintainable under Section37(1)(c).21.The arbitration proceedings have to be concluded withexpeditiousness and the challenges to be kept minimum. Thedisputes relating to arbitral awards have to be resolved speedily. If aview is taken that wherever an application for an amendment to thepetition under Section 34 is rejected an appeal would lie underSection 37 of the Act is it will lead to an anomalous situation. Aparty intending to delay the proceedings would keep filingapplications for amendment and upon rejection file an appealpraying for postponement of the petition under Section 34.According to the Respondent this is the exact intention of theAppellant. The Respondent moved the amendment after one year.After the amendment application was rejected the appeal filed on 6December 2019 was kept pending at the stage of removing officeobjections and was moved on an urgent basis only when theRespondent took steps to attach the assets in the executionproceedings in April 2021.22.The challenge in the present appeal does not fall underSection 37(1)(c) of the Act of 1996. It does not fall within any ofthe categories specified in Section 37. Since the challenge does notfall within the ambit of Section 37 of the Act the appeal is notmaintainable. Accordingly the preliminary objection raised by theRespondent is upheld. on 05 07 2021 on 06 07 skn 14 COMAPP 55.2020.doc23.Another facet that was argued before us by theRespondent is that Appellant is not remediless if this appeal is notmaintainable as the Act of 1996 has a scheme of deferring thechallenges till final disposal of the proceedings. The Respondentspointed out that under Section 13 if a challenge under anyprocedure agreed upon by the parties or under the procedure underSub Sectionis unsuccessful the arbitral tribunal is to continuethe arbitral proceedings and make an arbitral award. Under Section16 of the Act the arbitral tribunal can decide the pleas regarding itsjurisdiction and where the arbitral tribunal rejects the plea it has tocontinue with the arbitral proceedings and make an arbitral award.The aggrieved party then has to challenge such a finding whenchallenging the award under Section 34 of the Act. The DivisionBench of the Delhi High Court in the case of Harmanprit Singh hasheld that even if the appeal challenging the order of condoning thedelay in filing the Petition under Section 34 is not maintainable itdoes not mean that there is no remedy. If the arbitral award is setaside in part or in whole and the Appellant is aggrieved he mayprefer an appeal under Section 37 both on merits and on the groundthat the delay ought not to have been condoned. The Benchobserved that the remedy of challenging the decision of condoningthe delay is not extinguished but is deferred till the final decision ofthe court on the pending Section 34 petition. No contrary positionof law is shown to us that challenge to the orders regarding theamendment to the Arbitration Petition cannot be taken up in an on 05 07 2021 on 06 07 skn 15 COMAPP 55.2020.docappeal under Section 37 of the Act of 1996 from the final orderunder Section 34. However having held that the present appeal isnot maintainable it is not necessary for us to conclude this issue inthis appeal. 24.The appeal is dismissed as not maintainable. 25.It is clarified that the observations made in thisjudgment are in the context of deciding the maintainability of theappeal and not on the merits of the impugned order. 