RFA NO.9/2006 Page 1 of 19 ..* HIGH COURT OF DELHI : NEW DELHI + RFA (OS) No.9/2006 Judgment reserved on: 14th April, 2009 % Judgment decided on : 18th September, 2009 ITE India (P) Ltd. ....Appellant Through : Mr. Sanjay Jain, Sr. Adv. with Ms. Neeru Sharma and Mr. Sarfaraz, Advs. Versus Mukesh Sharma and Ors. .…Respondents Through : Mr. Rajiv Nayar, Sr. Adv. with Mr. Viplav Sharma, Adv. for Respondents Coram: HON'BLE MR. JUSTICE A.K. SIKRI HON'BLE MR. JUSTICE MANMOHAN SINGH 1. Whether the Reporters of local papers may be allowed to see the judgment? No 2. To be referred to Reporter or not? Yes 3. Whether the judgment should be reported Yes in the Digest? MANMOHAN SINGH, J. 1. By this judgment we shall dispose of RFA filed by the plaintiff/appellant (hereinafter referred to as „ITE‟) against the judgment of a Learned Single Judge of this court passed on December 20, 2005 in I.A. No. 6527/2005 and in CS (OS) No. 926/2005. 2. Brief facts as stated in the plaint are : (a) That the Appellant filed a suit for declaration whereby a decree of declaration was sought to the effect that there exists no valid arbitration agreement between the parties and that the letter issued by respondent no.6 at the request of respondents 3 and 5 herein is null and void. Another declaration prayed for was that the letter dated 29th June 2005 issued by respondent no.6 RFA NO.9/2006 Page 2 of 19 declaring that the appellant be asked to jointly nominate the arbitrator along with defendants 1 and 2 be declared null & void. (b) The Appellant is a company incorporated under the provisions of the Companies Act having its registered office at 583, Lajpat Nagar, Part-II, New Delhi. The respondent no.1 Sh. Mukesh Sharma is a citizen of India who entered into a Shareholders agreement with respondent no.3 containing the arbitration clause vide agreement dated 1st July, 1998. Respondent no.2 was a company incorporated in the year 1997 by respondent no.1 and his other family members. Respondent no.3 purchased shares in respondent no. 2 company in the year 1998 and shareholders agreement dated 1st July 1998 was arrived at between respondent no. 1 and respondent no. 3. The respondent no. 2 company is also a party to the said agreement which contains the arbitration clause. The appellant and respondents 1 to 5 are shareholders of the company in view of the shares allotted from time to time and since the present dispute arose, arbitration was invoked by contesting respondents 3 to 5. 3. On 20 May, 2005, before respondent no. 6, the said respondent no. 3 claimed that such invocation is in terms of the arbitration agreement in Clause 14 of the Shareholders Agreement dated 1 July, 1998. Thereafter, respondent no. 6 issued notice to the appellant on 27 May, 2005 calling upon the parties to nominate an arbitrator. In receipt of this notice, the appellant wrote a letter dated 23 July, 2005 stating that it was not a party to the Shareholders Agreement, but respondent no. 6 issued another letter dated 29 June, 2005, inter-alia, insisting that the appellant nominate an arbitrator. Therefore, a suit before this court was filed. An ex parte injunction dated 12th July, 2005 was granted by a learned single Judge of this court stating that ITE is not open to participate in the arbitration proceedings as prima facie it did not appear to be party to the arbitration agreement relied upon. 4. The respondent nos. 3 to 5 filed I.A No.6527/2005 under Section 45 of the Arbitration and Conciliation Act, 1996 (referred to as RFA NO.9/2006 Page 3 of 19 „the Arbitration Act‟) for reference of ITE to arbitration proceedings initiated by the said respondents in ICC (against ITE and defendant nos. 1 and 2). 5. By the impugned judgment dated December 20, 2005, Learned Single Judge of this court allowed the application under Section 45 of the Act with the observation that the matter be considered by the ICC. By the same judgment, the main suit was also dismissed. The Ld. Single Judge observed that ITE was not totally outside the purview of the arbitration clause in the shareholders agreement and further held that it was up to the ICC to consider the validity of the arbitration clause qua ITE. 6. While allowing the application filed by respondents 3 to 5 under Section 45 of the Arbitration Act, the learned Single Judge by his judgment dated 20th December, 2005 has, inter alia, arrived at the following finding after considering the pleadings, documents and the law point involved in the matter:- “40. The conduct of the parties including the communications exchanged and pleadings filed also substantiates this view. The letter dated 1.9.2004 cannot be explained away by stating that it was written by Mr. Mukesh Kumar in his personal capacity. The reference to the word "I" was only a manner of addressing and the same is apparently on behalf of the plaintiff. The pleadings before the ICC also show that the stand of the plaintiff was that there could be transfer of shares to bodies corporate without any consideration. This was so since the plaintiff itself understood that it was an assign. The subsequent effort to explain the same away by the affidavit dated 24.11.2005 cannot be accepted since the nature of alleged consideration was adjustment of loans and that appears to be a matter of internal financial adjustment of one group inter se the individuals and the companies representing the said group. RFA NO.9/2006 Page 4 of 19 41. In so far as the scope of enquiry under Section 45 of the Act is concerned, the observations in Shin-etsu Chemical Co. Ltd. case (supra) are of great importance. Section 45 of the said Act reads as under: 45. Power of judicial authority to refer parties to arbitration.-- Notwithstanding anything contained in Part I or in the Code of Civil Procedure, 1908 (5 of 1908), a judicial authority, when seized of an action in a matter in respect of which the parties have made an agreement referred to in section 44 shall, at the request of one of the parties or any person claiming through or under him, refer the parties to arbitration, unless it finds that the said agreement is null and void, inoperative or incapable of being performed. 42. The Supreme Court observed that only a prima facie examination has to take place and a summary decision arrived at on the objections raised on the alleged nullity, voidness, inoperativeness or incapability of the arbitration agreement. In case a request to refer the matter to arbitration is to be rejected, at that stage, the court would afford full opportunity to the parties to lead evidence. Thus, at a pre-reference stage, it was held that what was contemplated was only a prima facie view for making the reference leaving the parties to full trial either before the arbitral tribunal or before the court at a post-award stage. 43. In view of the aforesaid position, it is not necessary to go into greater detail into the submission of the learned counsel for the defendant No. 3 to 5 that it a mere suit for declaration to the effect that there exists no arbitration agreement is not contemplated under section 45 of the Act and what is contemplated is a suit which is otherwise maintainable in law but the subject matter of suit is such that the same falls within the domain of determination of arbitration agreement falling under Section 44 of the said Act. It may, however, be observed that the Supreme Court in Kvaerner Cementation India Ltd. case (supra)has laid great emphasis on the principle of the arbitral tribunal ruling on its own jurisdiction including the ruling on any objection with respect to the existence or validity of the arbitration agreement for which civil court would have no jurisdiction. 44. If the facts of the present case are considered within the aforesaid parameters, it cannot be said that the plaintiff is totally outside the purview of the arbitration clause. This is on the reading of the shareholders agreement. It is, however, to be kept in mind that the consideration of these aspects arise from the view to be taken both on the Interlocutory Application for stay of the plaintiff and the RFA NO.9/2006 Page 5 of 19 application filed by defendant No. 3 to 5 under Section 45 of the said Act. The present case is not one where this court can come to the conclusion that the agreement is null and void or inoperative as in Bharti Televentures Ltd. case (supra). There is also thus no question of the bifurcation of any claim which will invite the ratio of Sukanya Holdings Pvt. Ltd. case (supra). Such an eventuality would only arise if it was held that the claim qua the plaintiff was not arbitrable. 45. I am thus of the considered view that in so far as the interim application for stay is concerned, there is no prima facie case made out. Not only that, the plaintiff himself has moved an appropriate application before the ICC which would consider the validity of the agreement qua the plaintiff. 46. The said application is thus liable to be rejected. Ordered accordingly. Interim orders stand vacated.” 7. The present appeal has been filed against the above- mentioned judgment. At the beginning of the hearing of the present appeal, Senior Counsel Mr. Rajiv Nayar for respondents 3 to 5 raised a preliminary objection by submitting at the outset that the present appeal is not maintainable under the provision of Section 96 Code of Civil Procedure, 1908 or the Letters Patent Appeal under Section 10 Delhi High Court Act, 1996. While considering the objection of maintainability of the appeal, the learned counsel for both the parties have given their consent that if after hearing of the matter, this court comes to the conclusion that the appeal itself is not maintainable, then there will be no question of going into the merit of the appeal. 8. The main contentions of Mr. Nayar in support of his preliminary objection are: (a) That Section 50 is a special and specific provision in respect of appeals against the judgments and orders passed in Part II of the Act and an appeal only lies against an order refusing to refer the parties to arbitration under RFA NO.9/2006 Page 6 of 19 Section 45. No appeal is maintainable from an order passed under Section 45 referring the parties to arbitration. (b) Since in the present case the learned Single Judge has passed an order under Section 45 referring the parties to go for arbitration the said order referring to arbitration is not appealable and, therefore, the appeal is not maintainable. (c) The next submission is that the Act is a special Statute dealing with arbitration, both domestic and international, held in India (Part I) and in respect of foreign awards the rights and remedies are provided in the Act itself. It is settled law that the right of appeal is to be conferred by Statute and no right to appeal can be conferred upon a party except by express words of the Statute. Since the Arbitration and Conciliation Act is a special statute and confers a statutory right of appeal under Section 50 only in certain matters specified in that section. (d) That the appeal under Section 96 of the Code of Civil Procedure, 1908 is not maintainable in view of the objection raised in (a) to (c) of para 8 above. 9. Per contra the learned counsel for the appellant has argued that: (a) Unlike Section 37, Section 50 of the Arbitration Act does not bar appeals maintainable under the provisions of law. The Ld. Single Judge, by the impugned judgment, has disposed of the suit itself, therefore, the present appeal is maintainable under Section 96 Civil Procedure Code, 1908 and also as Latter Patent Appeal under Section 10 of the Delhi High Court Rules, 1966. (b) That unlike Section 8 of the Arbitration Act, the test applicable to section 45 is less stringent and if the plaintiff is able to establish a prima facie case the suit must proceed to trial, therefore, the learned Single Judge had erred in allowing the application filed by the defendants under Section 45 of the Arbitration Act. (c) Learned counsel for the appellant submits that the language of Section 50 of the Act is different from the language of Section 37. The phrase “and from no other” does not appear in Section 50. Section 37 of the Act is para materia to Section 39 of the Arbitration Act, 1940, therefore, Section 50 does not expressly or impliedly exclude the filing of this appeal. Rather it confers additional rights on a person whose application under Section 45 is dismissed. 10. In view of the above stated, the learned senior counsel Mr. Sanjay Jain for the appellant has argued that the present appeal is RFA NO.9/2006 Page 7 of 19 certainly maintainable. On merit a suggestion is given by him that the appellant is ready and willing to have the arbitration conducted by any retired Judge of this court or of the Hon‟ble Supreme Court of all disputes which have originated from the agreement between the parties. 11. Learned senior counsel for respondents 3 to 5 is not agreeable to the above-stated suggestion given by the learned counsel for the appellant. The submission of respondents 3 to 5 is that arbitration proceedings are to be conducted as per agreement and in fact the suit filed by the appellant before trial court was not maintainable. 12. The points which arise for determination are as follows :- a] Whether the Letters Patent Appeal filed under Section 10 of the Delhi High Court Act, 1966 is maintainable in view of the facts and circumstances of the present case or not; and, b] Whether the appeal filed by the appellant, under Section 96 of Code of Civil Procedure, 1908 against the judgment passed by the learned Single Judge in the application filed by the respondent under Section 45 of the Arbitration and Conciliation Act, 1996 referring the parties to arbitration, is maintainable or not. 13. Firstly, we shall deal with the objections raised by the learned counsel for the respondent nos.3 to 5 that an order passed under Section 45 of the Act is not appealable under Section 10 of the Delhi High Court Act. 14. Section 50 deals with “Appealable Order” under Part II of the Act and provides in clear and unambiguous words that an appeal under Part – II shall lie from an order refusing to refer the parties to arbitration under Section 45, to the Court authorised by law to hear appeals from RFA NO.9/2006 Page 8 of 19 such order. Section 50 reads thus :- “50. Appealable Orders (1) An appeal shall lie from theorder refusing to- (a) refer the parties to arbitration under section 45; (b) enforce a foreign award undersection 48, to the court authorised by law to hear appeals from such order. (2) No second appeal shall liefrom an order passed in appeal under this section, but nothing in this sectionshall affect or take away any right to appeal to the Supreme Court. 15. Section 50 only provides for an appeal where a Court passes an order refusing to refer the parties to a case to arbitration in terms of Section 45 of the Act and there is no appeal provided in cases where an order referring the parties to arbitration is passed by the court having jurisdiction. 16. That under Section 104 of the Code of Civil Procedure, 1908, an appeal shall lie only in specific circumstances as enumerated under Section 104[1][ff-i]. Under Section 104 of the Code of Civil Procedure, 1908, an appeal shall lie only against orders. Section 104 reads as under :- “104. Orders from which appeal lies (1) An appeal shall lie from the following orders, and save as otherwise expressly provided in the body of this Code or by any law for the time being in force, from no other orders:-- 1 [***] 2 [(ff) an order under section 35A;] 3 [(ffa) and order under section 91 or section 92 refusing leave to institute a suit of the nature referred to in section 91 or section 92, as the case may be;] (g) an order under section 95; RFA NO.9/2006 Page 9 of 19 (h) an order under any of the provisions of this Code imposing a fine or directing the arrest or detention in the civil prison of any person except where such arrest or detention is in execution of a decree; (i) any order made under rules from which an appeal is expressly allowed by rules: 2 [Provided that no appeal shall lie against any order specified in clause (ff) save on the ground that no order, or an order for the payment of a less amount, ought to have been made.] (2) No appeal shall lie from any order passed in appeal under this section. 17. Section 104 of the Code of Civil Procedure, 1908 does not contemplate any appeal against an order passed under Section 45 of the Arbitration and Conciliation Act, 1996. An order passed under Section 45 of the Arbitration Act is appealable under Section 50[1][a] of the Arbitration Act only in a case where the court below has refused to refer the parties to arbitration under Section. In such a condition an aggrieved party can initiate an appeal under Section 50[1][a] of the Act, not otherwise. 18. The Hon‟ble Supreme Court in Shin-Estu Chemicals Co. Ltd. V/s. Aksh Optifiber Ltd. & Anr. [2005] 7 SCC 234 has held that there is no provision under the Arbitration Act for filing an appeal in case a judicial authority refers the parties to arbitration. In the aforesaid judgment all the three Judges of the Hon‟ble Court are unanimous that an order passed under Section 45 of the Act referring the parties to arbitration is non-appealable. Their Lordships have held as under :- “As can be seen from the above, an order refusing to refer the parties to arbitration under Section 45 of the Act is appellable. There is, however, no provision for filing an appeal if the judicial authority refers the parties to arbitration. RFA NO.9/2006 Page 10 of 19 .........The Legislature under Section 50 has clearly allowed appeal only in case the judicial authority refuses to refer the parties to arbitration or refuses to enforce a foreign award. The fact that a provision is not made for an appeal in case reference is made to arbitration is not a ground to say that the court should prima facie decide the validity of the agreement ignoring the express provisions of Section 45. The Legislature has granted the right of appeal in the event of refusal to refer but not in the event of the order being made for reference of parties to arbitration. This provision of appeal is not determinative of the scope of Section 45 to mean that the determination thereunder has to be prima facie................. [Y K Sabharwal, J. as his Lordship then was] The finding of the court that the arbitration agreement is valid, operative and enforceable, if in favour of the party setting up the arbitration agreement, is not appellable under Section 50 as a matter of legislative policy. Refusing to refer parties to arbitration under Section 45, is however made appellable under Section 50[1][a]......[B N Srikrishna, J.] .............Where a judicial authority or the Court refused to make a reference on the grounds available under Section 45 of the Act, it is necessary for the judicial authority or the court which is seized of the matter to pass a reasoned order as the same is subject to appeal to the Appellate Court under Section 50 [1][a] of the Act and further appeal to this Court under sub- Section [2] of the said Section.........” [D.N. Dharmadhikari, J.] 19. In the case Union of India V/s. Mohindera Supply Company AIR 1962 SC 256, the Hon‟ble Supreme Court has held that the intention of the legislation that the special powers conferred upon an Act shall have overriding effect on the general provisions of law as contained in the Code of Civil Procedure. It was further held that in the Arbitration Act there is no provision similar to Section 4 of the Code of Civil Procedure which preserves the powers reserved to courts under special statutes. The Arbitration Act, which is consolidating and amending Act being substantially in the form of the code relating to arbitration, must be construed without any assumption that it was not intended to alter the law relating to appeals, the words of the statute are explicit and they must be given their full effect and interpreted in their RFA NO.9/2006 Page 11 of 19 natural meaning, uninfluenced by any assumptions derived from any other state of law and without any assumption that the legislature must have intended to leave the existing law unaltered. Therefore, Section 10 of the Delhi High Court Act, 1966 does not rescue the present appeal. 20. This Court in the case of Union of India V/s. A S Dhupia Air 1970 Delhi 108 [Full Bench] clearly laid down that the Arbitration Act is a specific code dealing with arbitration matters and appeals are maintainable only against the orders as provided under the Arbitration Act alone. The right to appeal inheres in no one and therefore, for an appeal to be maintainable, it must be backed by clear authority either given by statute or by some equivalent authority. 21. This court in Chairman & Managing Director, NTPC vs. Raj Kishan & Co. 2001(5) AD 242 has held that in cases where an appeal is not maintainable under the provisions of the Arbitration Act, an appeal under Section 10 of the Delhi High Court Act, 1966 will also not be maintainable. 22. Reliance has also been placed by the respondents on the case of Jindal Exports Ltd vs. Furest Day Canson Ltd., 1995 (51) DRJ 170 decided by a Division Bench of this court, a similar question arose and decided by the Division Bench. Para 9 of the judgment is reproduced as under: “9. Only for the purpose of deciding the preliminary objection, which has been raised by learned counsel for the respondent it may be observed that Section 49 of the A&C Act, 19% provides that only where Court is satisfied that foreign award is enforceable under Chapter I of Part II, being New York Convention Awards that the said award shall be deemed to be a decree of that Court. therefore, it RFA NO.9/2006 Page 12 of 19 would not be permissible to straight away file execution application in Court and in order to enforce the award, it would be necessary, for a person seeking enforcement, to first approach the Court and seek appropriate adjudication, as envisaged under Section 48 of the A&C Act. Such an adjudication was not sought and only execution application was filed, which by the impugned order has been held to be not maintainable. Learned Single Judge observing that since the petition substantially complies with the requirement of an application under Section 47 of the A&C Act, 1996, ordered that it be treated as an application under Section 47 of the said Act. Admittedly, the impugned order is such against which an appeal would not lie under Section 50 of the Act.” 23. There is no force in the contention of the appellant that there is a difference between Section 37 and 50 of the Arbitration Act and, therefore, the judgment rendered under Section 37 would not be applicable to Section 50 of the Act. The argument of the learned counsel for the appellant is that Section 37 of Specific Relief Act, 1963 is different to the extent that it contains the following words “and