Case: Union Of India Vs. M/S. Simplex Infrastructures Ltd

2. Briefly stated, the Respondent being the lowest bidder was allotted a contract by the Appellant in respect of work styled as "Construction of Tsunami Reconstruction Project in A & N Islands. SH: Construction of 821 units of permanent shelters (single stories) including internal water supply sanitary installation & internal Electrification in the Island of Teressa." The contract agreement was entered into between the parties on 5th October, 2006. According to the Appellant, the Respondent failed to adhere to the time frame for completion of the contract. As a result, a show cause notice was issued to the Respondent on 27th April, 2007 to show cause as to why the contract should not be rescinded by invoking clause 3 of the agreement. The Respondent submitted its response thereto on 8th May, 2007. Despite the dismal performance of the Respondent, the Appellant gave it one more opportunity to improve on the performance vide a letter dated 20th June, 2007. The Respondent, however, submitted its 12th revised completion plan dated 10th October, 2007. Since the Respondent failed to adhere to the extended time line and also miserably failed to maintain the quality and progress of work, the Appellant served it with a second show cause notice on 4th January, 2008. The Respondent replied to the said show cause notice on 1st February 2008. However, the explanation offered by the Respondent, in the perception of the Appellant, was found to be unsatisfactory and baseless. Hence, the Appellant rescinded the contract vide letter No. 57(12)/RE/TRP/Kamorata/07-08/638 dated 25th February, 2008.The Respondent then invoked the arbitration clause in the agreement, pursuant to which the competent authority appointed an Arbitrator vide letter no. 23(6)/(1)ADG(SR)/TRP/08-09/469 dated 27th August, 2008. The arbitration hearing concluded on 27th March, 2014. An Award was published vide letter No.ARB/RKM/TRP/Case 005/2014-20 dated 27th October, 2014. The Appellant received a hard copy of the Award on 31st October, 2014, wherein the Arbitrator held that the rescindment order passed by the Appellant was illegal as time was not the essence of the contract and further directed the Appellant to pay the final bill submitted by the Respondent. Aggrieved, the Appellant filed a petition for setting aside the arbitral award before the District Court at Port Blair being Appeal No. 2 of 2015. The Respondent, on the other hand, filed an execution proceeding in relation to the self same Award before the High Court at Calcutta being EC Case No.734 of 2015. The Appellant then preferred an application in Appeal No.2 of 2015 before the District Court, for stay of the Award. The District Judge allowed the said application. That fact was brought to the notice of the High Court at Calcutta in execution proceedings initiated by the Respondent. The High Court vide order dated 15th September, 2015, disposed of the Execution petition filed by the Respondent and gave liberty to the Respondent to appear before the District Court and to resist the proceedings pending in that court.The Respondent then filed objections in the proceedings before the District Court. According to the Respondent, the appeal before the District Court was not maintainable as the application under Section 9 of the Arbitration Act with regard to the subject matter of the arbitration proceedings was filed before the High Court at Calcutta. It was then contended that the District Court did not have territorial jurisdiction as per Section 42 of the Act and that the petition under Section 34 against the subject award can proceed only before the High Court. The District Court vide order dated 12th February, 2016 accepted that objection. It held that the petition filed by the Appellant under Section 34 of the Act was not maintainable on account of territorial jurisdiction.The Appellant then challenged the Award by filing Arbitration Petition No. 224 of 2016 before the High Court at Calcutta under Section 34 of the Act and prayed for setting aside the Arbitral Award. The Appellant also filed an application being G.A. No: 958 of 2016 for condoning delay, mentioning the circumstances in which the Appellant had to approach the High Court under Section 34 of the Act. The learned Single Judge after hearing the parties allowed the said application for condonation of delay, being satisfied that sufficient cause was made out by the Appellant for condoning the delay of 131 days. The said order readsCourt: After considering the submissions made by the learned advocate for the applicant/petitioner and upon perusing the application for condonation of delay, it appears that sufficient cause has been shown to explain the delay in filing the application, being AP No.224 of 2016 and as such the delay is condoned. The application for condonation of delay, being GA No.958 of 2016, is accordingly allowed.Aggrieved by the aforementioned order dated 27th April, 2016, the Respondent preferred an intra court letters patent appeal being G.A: No.1650 of 2016. This appeal was contested by the Appellant inter alia on the ground that such letters patent appeal was not maintainable. The Division Bench adverted to the relevant decisions pressed into service by both the sides including the decision of this Court in Fuerst Day Lawson Limited v. Jindal Exports Limited. (2011) 8 SCC 333     It has also noted that the order under appeal is not appealable under Section 37 of the Act. The Division Bench, however, relied on the judgment of the Division Bench of the High Court at Calcutta in the case of Modi Korea Telecommunication Ltd. v. Appcon Consultants Pvt. Ltd. (1999) 2 CHN 107     and of the special Bench of three-Judges in M/s. Tanusree Art Printers & Anr. v. Rabindra Nath Pal, (2000) 2 CHN 213   to hold that the three-Judge Bench decision of the High Court was directly on the point and was binding on it. It then proceeded to conclude that the order passed by the learned Single Judge, sensu stricto was not falling within the provisions of the Act and was without jurisdiction. On that logic the Division Bench reversed the order of the learned Single Judge by invoking its jurisdiction under Letters Patent Appeal.

Court's reasoning:
9. After hearing the counsel for the parties and going through the decisions relied upon by both sides, we have no hesitation in allowing this appeal.After this decision, there is no scope to contend that the remedy of Letters Patent Appeal was available in relation to judgment of the learned Single Judge in question. This legal position has been restated in the recent decision of this Court (to which one of us was party, Justice Dipak Misra), in the case of Arun Dev Upadhyaya v. Integrated Sales Service Ltd & Anr.(2016) 9 SCCThe Division Bench of the High Court, however, made a fine distinction by holding that the judgment of the learned Single Judge of condoning delay in filing of the petition under Section 34 of the Act was without jurisdiction and not in terms of the provisions of the Act. It is not possible to countenance this approach. The Division Bench, in our opinion, was not right in observing that the decision in M/s. Tanusree Art Printers & Anr. (supra) being of a special bench of three-Judges of the same Court, was binding, in spite of having noticed the decision of this Court in Fuerst Day Lawson Limited (supra) - which is directly on the point and was pressed into service by the Appellant. Neither the Division Bench of the High Court at Calcutta which dealt with the case of Modi Korea Telecommunication Ltd. (supra) nor the three-Judges Bench which decided the case of M/s. Tanusree Art Printers & Anr.(supra), had the benefit of the judgment of this Court in Fuerst Day Lawson Limited (supra), which is later in time.On a bare reading of this provision, it is noticed that remedy of appeal has been provided only against an order of setting aside or refusing to set aside an arbitral award under Section 34(1) (c). No appeal is provided against an order passed by the Court of competent jurisdiction condoning the delay in filing the petition under Section 34 of the Act as such. The Division Bench in the impugned Judgment, therefore, rightly noted that remedy of appeal against the impugned order of the learned Single Judge was not otherwise available under Section 37 of the Act.In our opinion, the issue is squarely answered against the Respondent by the decision of this Court in Fuerst Day Lawson Limited (supra). In that, the Judgment of the learned Single Judge dated 27th April, 2016, was passed on an application purported to be under Section 34(3) of the Act, for condoning delay in filing of the petition for setting aside the arbitral award. Hence, the remedy of Letters Patent Appeal against that decision is unavailable. The question as to whether the learned Single Judge had rightly exercised the discretion or otherwise, could be assailed by the Respondent before this Court by way of special leave petition. But, certainly not by way of a Letters Patent Appeal under clause 15. For, even if the learned Single Judge may have committed manifest error or wrongly decided the application for condonation of delay, that judgment is ascribable to exercise of jurisdiction under Section 34(3) of the Act. In other words, whether the prayer for condonation of delay can be accepted or whether the application deserves to be rejected, is a matter well within the jurisdiction of that court.The learned counsel for the Respondent was at pains to persuade us that the decision of the learned Single Judge is palpably wrong and cannot be sustained in law. However, we cannot permit the Respondent to agitate that plea in the present appeal preferred by the Appellant challenging the impugned decision of the Division Bench. Instead, we deem it appropriate to leave all contentions available to both sides open and give liberty to the Respondent to challenge the judgment of the learned Single Judge dated 27th April, 2016 in G.A.No.958 of 2016, if so