Issue whether Civil Procedure Code applicable in Arbitration appeal referred to larger...

Issue whether Civil Procedure Code applicable in Arbitration appeal referred to larger bench by SC [read order]

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A two-judge bench of the Supreme Court has referred the issue whether the provisions of the Civil Procedure Code are applicable to an appeal under Section 37 of the Arbitration and Conciliation Act, 1996, to a larger bench, since this bench felt that an earlier contrary decision of a two-judge bench of the Supreme Court in the case of ITI Ltd. vs. Siemens Public Communications Network Ltd., (2002) 5 SCC 510, seemed to be incorrect. This order of the Supreme Court was passed by a bench of Justice Dipak Misra and Justice Amitava Roy in the case of Mahanagar Telephone Nigam Ltd. v. M/s. Applied Electronics Ltd. [Civil Appeal No(s). 11584 OF 2016 (Arising out of SLP(C) Nos. 2865 OF 2015); decided on 24 November 2016].

In this case, Delhi high court, while expressing the view that the CPC is applicable to an appeal preferred under Section 37 of the Arbitration and Conciliation Act, had in the impugned order opined that the cross objection preferred by the respondent herein was maintainable and accordingly entertained the same after condoning the delay. This was challenged before the Supreme Court.

Firstly, let us clarify what is a “cross-objection”. For this purpose, we may refer to Rule 22 of Order 41 of the CPC:

22. Upon hearing respondent may object to decree as if he had preferred separate appeal.— (1) Any respondent, though he may not have appealed from any part of the decree, may not only support the decree but may also state that the finding against him in the Court below in respect of any issue ought to have been in his favour; and may also take any cross-objection to the decree which he could have taken by way of appeal, provided he has filed such objection in the Appellate Court within one month from the date of service on him or his pleader of notice of the day fixed for hearing the appeal, or within such further time as the Appellate Court may see fit to allow.

Explanation.—A respondent aggrieved by a finding of the Court in the judgment on which the decree appealed against is based may, under this rule, file cross-objection in respect of the decree insofar as it is based on that finding, notwithstanding that by reason of the decision of the Court on any other finding which is sufficient for the decision of the suit, the decree, is, wholly or in part, in favour of that respondent.

(2) Form of objection and provisions applicable thereto.—Such cross-objection shall be in the form of a memorandum, and the provisions of Rule 1, so far as they relate to the form and contents of the memorandum of appeal, shall apply thereto.

(3) [* * *]

(4) Where, in any case in which any respondent has under this rule filed a memorandum of objection, the original appeal is withdrawn or is dismissed for default, the objection so filed may nevertheless be heard and determined after such notice to the other parties as the Court thinks fit.

(5) The provisions relating to appeals by indigent persons shall, so far as they can be made applicable, apply to an objection under this rule.”

Cross-objection has been nicely explained by the Supreme Court in the case of MCD vs. International Security & Intelligence Agency Ltd., (2004) 3 SCC 250, in the following paragraph:

“Right to prefer cross objection partakes of the right to prefer an appeal. When the impugned decree or order is partly in favour of one party and partly in favour of the other, one party may rest contended by his partial success with a view to giving a quietus to the litigation. However, he may like to exercise his right of appeal if he finds that the other party was not interested in burying the hatchet and proposed to keep the lis alive by pursuing the same before the appellate forum. He too may in such circumstances exercise his right to file appeal by taking cross objection. Thus taking any cross objection to the decree or order impugned is the exercise of right of appeal though such right is exercised in the form of taking cross objection. The substantive right is the right of appeal; the form of cross objection is a matter of procedure.”

Coming back to the main issue in this article, in the present case, the Supreme Court referred to Section 5 of the Arbitration and Conciliation Act, 1996, which is reproduced as under:

5. Extent of judicial intervention.—Notwithstanding anything contained in any other law for the time being in force, in matters governed by this Part, no judicial authority shall intervene except where so provided in this Part.”

The Supreme Court held that Section 5 which commences with a non-obstante clause clearly stipulates that no judicial authority shall interfere except where so provided in Part 1 of the 1996 Act. The court held that the Arbitration and Conciliation Act, 1996 is a complete Code and Section 5 in categorical terms along with other provisions, leads to a definite conclusion that no other provision can be attracted. Thus, the application of CPC is not conceived of and, therefore, as a natural corollary, the cross-objection cannot be entertained. However, the court noted that in the case of ITI Ltd. vs. Siemens Public Communications Network Ltd., (2002) 5 SCC 510, it had been held by a two-judge bench of the Supreme Court that the applicability of CPC is not prohibited. In the present case, the Supreme Court held that the analysis made in ITI Ltd. case to the effect that merely because the 1996 Act does not provide CPC to be applicable, it should not be inferred that the Code is inapplicable seems to be incorrect, for the scheme of the 1996 Act clearly envisages otherwise and the legislative intendment also so postulates.

The Supreme Court also referred to the judgment of a 3-judge bench in the above case of MCD vs. International Security & Intelligence Agency Ltd., (2004) 3 SCC 250, wherein the Court dealt with maintainability of a cross objection under Order XLI Rule 22 of the CPC. in the context of the old Arbitration Act, 1940. The Court held that the three-Judge Bench decision in International Security & Intelligence Agency Ltd. case can be distinguished as that is under the old Arbitration Act of 1940 which had Section 41 which clearly stated that the procedure of CPC would be applicable to appeals.

The Supreme Court observed that as it is unable to follow the view expressed in the aforesaid ITI Ltd. case and it is of the considered opinion that the said ITI Ltd. decision deserves to be re-considered by a larger Bench, it directed to refer the matter to the Chief Justice of India for constitution of an appropriate larger Bench to resolve this issue.

Read full order of the court:

 

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