Case: Enkay Texo Food Industries Limited Vs. Consite Engineering Company Private Limited

M.L. PENDSE, J.Both appeals admitted. Paper books dispensed with. Counsel for respondents in each of the appeal waive service. By consent, both appeals taken on board and called out for hearing.2.Enkay Texo Food Industries Limited in September, 1991 flouted tender for mechanical works comprising supply, erection and commissioning of self-supporting chimney, fuel oil, storage tank, etc. The tender submitted by Consite Engineering Company Private Limited was accepted and on December 16, 1991 letter of intent was issued, after a detailed purchase order was issued on December 3, 1991. The dispute arose in respect of performance of the contract and Consite Engineering Company Private Limited instituted two suits being Suit Nos. 1607 and 1662 of 1992 in this Court to claim damages and to restrain Enkay Texo Food Industries Limited from enforcing Bank guarantee. On April 29, 1992, the parties filed consent decretal order of reference and referred all claims, disputes and differences in the suits to the sole arbitration. The arbitrator declared the award on December 29, 1992 and directed Enkay Texo Food Industries to pay Rs. 14,99,981.15 with incidental reliefs to Consite Engineering Company Private Limited. The award declared by the Arbitrator is a non-speaking award.3.On May 17, 1993, Enkay Texo Food Industries Limited instituted Arbitration Petition No. 90 of 1993 under section 30 of the Arbitration Act, 1940 for setting aside the award dated December 29, 1992. In accordance with Rule 773 of the Rules and Forms of the High Court of Judicature at Bombay, on the Original Side, all petitions under the Arbitration Act are required to be placed before Judge sitting in Chamber for admission after prior notice to all parties concerned. The Chamber Judge is entitled either to admit or reject the petition or pass such other order thereon as may deem fit. The petition was placed before Mr. Justice Dhanuka for admission on June 14, 1993 and the learned Judge directed Enkay Texo Food Industries Limited to furnish Bank guarantee in the sum of Rs. 15 lakhs before considering admission of the petition. The Bank guarantee was furnished in pursuance of the order. The petition was then placed for admission on September 14, 1993 before Mr. Justice Rane. The learned Judge by speaking order admitted the petition by recording prima facie finding that the petition required detailed examination to appreciate the contentions raised. The learned Judge thereafter proceeded to pass interim order on the plea that the benefit under the award is deprived by admission of the petition. The trial Judge directed that the Bank guarantee furnished by Enkay Texo Food Industries Limited in the sum of Rs. 15 lakhs should be reduced to Rs. 7,50,000/- and Enkay Texo Food Industries Limited should deposit a sum of Rs. 7,50,000 in Court. The trial Judge permitted Consite Engineering Company Private Limited to withdraw the said amount of Rs. 7,50,000/- on furnishing a Bank guarantee and on condition that in case Enkay Texo Food Industries Limited succeeds in the petition, then the Consite Engineering Company Private Limited shall re-deposit the amount with interest at 12% per annum. Enkay Texo Food Industries Limited has filed Appeal No. 928 of 1993, while Consite Engineering Company Private Limited has filed Appeal No. 966 of 1993 in respect of the order passed by learned trial Judge.4.Shri Mehta, learned Counsel appearing on behalf of Enkay Texo Food Industries Limited, submitted that the interim order passed by the trial Judge is without jurisdiction. It was contended that the trial Judge could not have directed furnishing of Bank guarantee or deposit of amount after admission of the petition, as declaration of the award by the arbitrator does not amount to decree of Civil Court. Shri Mehta submitted that the award is not enforceable unless decree in terms of the award is passed by the Court and consequently, the trial Judge had no jurisdiction to provide for enforcement of the award by issuing interim orders. We find considerable merit in the submission urged by the learned Counsel. Mrs. Mody, learned Counsel appearing on behalf of Consite Engineering Company Private Limited, submitted that section 18 of the Arbitration Act confers power upon the Court to pass interim orders. Sub-section (1) of section 18 is reads as under :"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."The sub-section entitles the Court to pass interim orders in two contingencies : (a) that the 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, and (b) speedy execution of the award is just and necessary. The first contingency contemplates situations which entitles Civil Court to grant attachment before judgment, while the second contingency is in respect of awards, enforcement of which is required forthwith, otherwise the Award itself becomes nugatory or redundent. The existence of either of the contingencies is not referred to by the trial Judge while passing interim orders. Indeed, it is not the claim of Consite Engineering Company Private Limited that Enkay Texo Food Industries Limited have taken any steps to defeat, delay or obstruct execution of any decree that may be passed upon the award. The award provides for payment of amount by Enkay Texo Food Industries Limited and by no stretch of imagination, it can be suggested that failure to immediately execute the award would lead to award being defeated. In our judgment, the requirement of sub-section (1) of section 18 of the Arbitration Act is not attracted to the facts of the case. The powers under sub-section (1) of section 18 do not entitle the Court to direct deposit of the amount awarded or furnishing of the Bank guarantee in each and every case. It is also not open for the Court to pass interim orders and a condition precedent to admit the petition is accordance with Rule 773 of the Original Side Rules. It is not possible to trace the source of power for interim order in sub-section (1) of section 18 of the Arbitration Act.5.Mrs. Mody then submitted that Rule 789 of Original Side Rules provides for application of provisions of Code of Civil Procedure in certain contingencies. The Rule reads as under :"789.In cases not provided for in the Rules contained in this chapter, the provisions of the Code of Civil Procedure, 1908, and the Rules of the Court in suits and material on the Original Side of the Court, shall, with any necessary modifications, apply to all proceedings before the Court and to all appeals under the Act. In case of inconsistency between the provisions of the Code of Civil Procedure and the Rules of the Court referred to herein, the said rules of the Court shall prevail."It was urged that it is open for the Court to pass appropriate orders to safeguard the interest of party in whose favour the award is passed by resort to provisions of section 151 of the Code of Civil Procedure. The submission is only required to be stated to be rejected. It is not permissible for the Court to resort to the provisions of section 151 of the Code of Civil Procedure only because the power is not available under any of the provisions of the Arbitration Act to direct execution of the award in absence of decree. Mrs. Mody submitted that in summary suits instituted under the Code of Civil Procedure, the Court has power to grant to the defendant leave to defend on condition and condition invariably is to make the defendant deposit the amount to cover a part of the claim. It was suggested that the powers conferred on the Court in Summary Suits can be exercised by Court entertaining petition under section 30 of the Arbitration Act. It is not possible to accede to the submission. It is not permissible to draw support from the provisions in respect of summary suits to pass orders in respect of petitions filed under section 30 of the Act. It is also difficult to appreciate how the Court can direct that the amount of Rs. 7,50,000/- deposited by Enkay Texo Food Industries Limited should be paid over to Consite Engineering Company Private Limited during the pendency of the petition. Even in summary suits where defendant is directed to deposit a part of the amount as condition to defend the suit, the Court has no jurisdiction to permit the plaintiff to withdraw the said amount. In our judgment, the Court exercising powers under section 30 of the Arbitration Act cannot direct deposit of the amount provided by the award except in cases provided under sub-section (1) of section 18 of the Arbitration Act. The interim order passed by the learned Single Judge, therefore, cannot be sustained being wholly without jurisdiction. The appeal preferred by Enkay Texo Food Industries Limited is, therefore, required to be allowed.6.Consite Engineering Company Private Limited preferred Appeal No. 966 of 1993 on two grounds. It was claimed that the trial Judge was in error in admitting the petition because Enkay Texo Food Industries Limited did not make out any valid ground which can be entertained under section 30 of the Arbitration Act. The contention cannot be entertained because appeal is not competent against admission of the petition. Petitions filed under section 30 of the Arbitration Act are placed for admission only after Rule 773 was amended and prior to the amendment, every petition was entertained as being the original proceeding. In our judgment, the order of admission does not amount to judgment and is not appeallable under Clause 15 of the Letters Patent or Order XLI of the Code of Civil Procedure. The second constitution urged by Mrs. Mody is that the trial Judge should have directed deposit of entire amount of Rs. 15 lakhs instead of Rs. 7,50,000/- only and Consite Engineering Company Private Limited should have been permitted to withdraw the said amount by furnishing Bank guarantee. The contention does not survive in view of the fact that even the order directing deposit of Rs. 7,50,000/- and furnishing of Bank guarantee for the balance amount was without jurisdiction. Appeal No. 966 of 1993 is, therefore, liable to be dismissed.7.Shri Mehta very fairly stated that though the trial Court had no jurisdiction to direct Enkay Texo Food Industries Limited to furnish Bank guarantee for Rs. 15 lakhs, such Bank guarantee was indeed furnished and Enkay Texo Food Industries Limited will keep the Bank guarantee alive till the disposal of the petition. In view of the statement of Shri Mehta, initial order passed by Mr. Justice Dhanuka on June 14, 1993 directing furnishing of Bank Guarantee in the sum of Rs. 15 lakhs is not required to be disturbed.8.Mrs. Mody requested that the direction should be issued to the trial Judge to dispose of the petition expeditiously and if possible by fixing peremptory date. It is not possible to issue any such direction, taking into consideration the heavy workload before the trial Judge. It is open for Consite Engineering Company to take appropriate proceeding before the trial Judge for expeditious hearing and it is for the trial Judge to decide whether the request should be granted.

Decision:
1[ds]n entitles the Court to pass interim orders in two contingencies : (a) that the 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, and (b) speedy execution of the award is just and necessary. The first contingency contemplates situations which entitles Civil Court to grant attachment before judgment, while the second contingency is in respect of awards, enforcement of which is required forthwith, otherwise the Award itself becomes nugatory or redundent. The existence of either of the contingencies is not referred to by the trial Judge while passing interim orders. Indeed, it is not the claim of Consite Engineering Company Private Limited that Enkay Texo Food Industries Limited have taken any steps to defeat, delay or obstruct execution of any decree that may be passed upon the award. The award provides for payment of amount by Enkay Texo Food Industries Limited and by no stretch of imagination, it can be suggested that failure to immediately execute the award would lead to award being defeated. In our judgment, the requirement of(1) of section 18 of the Arbitration Act is not attracted to the facts of the case. The powers under(1) of section 18 do not entitle the Court to direct deposit of the amount awarded or furnishing of the Bank guarantee in each and every case. It is also not open for the Court to pass interim orders and a condition precedent to admit the petition is accordance with Rule 773 of the Original Side Rules. It is not possible to trace the source of power for interim order in(1) of section 18 of the Arbitrationsubmission is only required to be stated to be rejected. It is not permissible for the Court to resort to the provisions of section 151 of the Code of Civil Procedure only because the power is not available under any of the provisions of the Arbitration Act to direct execution of the award in absence ofwas suggested that the powers conferred on the Court in Summary Suits can be exercised by Court entertaining petition under section 30 of the Arbitration Act. It is not possible to accede to the submission. It is not permissible to draw support from the provisions in respect of summary suits to pass orders in respect of petitions filed under section 30 of the Act. It is also difficult to appreciate how the Court can direct that the amount of Rs. 7,50,000/deposited by Enkay Texo Food Industries Limited should be paid over to Consite Engineering Company Private Limited during the pendency of the petition. Even in summary suits where defendant is directed to deposit a part of the amount as condition to defend the suit, the Court has no jurisdiction to permit the plaintiff to withdraw the said amount. In our judgment, the Court exercising powers under section 30 of the Arbitration Act cannot direct deposit of the amount provided by the award except in cases provided under(1) of section 18 of the ArbitrationAct. The interim order passed by the learned Single Judge, therefore, cannot be sustained being wholly without jurisdiction. The appeal preferred by Enkay Texo Food Industries Limited is, therefore, required to becontention cannot be entertained because appeal is not competent against admission of the petition. Petitions filed under section 30 of the Arbitration Act are placed for admission only after Rule 773 was amended and prior to the amendment, every petition was entertained as being the original proceeding. In our judgment, the order of admission does not amount to judgment and is not appeallable under Clause 15 of the Letters Patent or Order XLI of the Code of Civilcontention does not survive in view of the fact that even the order directing deposit of Rs. 7,50,000/and furnishing of Bank guarantee for the balance amount was without jurisdiction. Appeal No. 966 of 1993 is, therefore, liable to beview of the statement of Shri Mehta, initial order passed by Mr. Justice Dhanuka on June 14, 1993 directing furnishing of Bank Guarantee in the sum of Rs. 15 lakhs is not required to be disturbed.