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Judgment
N.K. Mody, J.
Being aggrieved by the order dated 8/10/2003 passed by Eighth Additional District Judge, Gwalior in case No. 11/02 MJC, present petition has been filed.
Short facts of the case are that there was a dispute between the parties. The matter was referred to the arbitrator. Vide award dated 12/3/ 2002 the Arbitral Tribunal has passed the award and it was directed that the petitioner shall pay an amount of Rs. 14,00,224.50/- to the respondents towards final settlement of claims referred to the arbitractor within a period of forty-five days from the date of service of the award. It was further observed that if the respondents fail to pay the awarded amount within the stipulated period. The amount shall carry interest at the rate of 12 percent per annum. After passing of this award on 12/3/2002 awarded amount was paid by the petitioner on 17/3/2002 which was accepted by the respondents under protest. Thereafter, an application was filed by the respondents u/s 34 of the Arbitration and Conciliation Act, 1996 (hereinafter, referred to as "A & C Act"). This application was opposed by the petitioner by moving an application for dismissal of the objections wherein it was alleged that the objection filed by the respondent is beyond the scope of section 34 of the A & C Act. By the impugned order dated 8/10/2003 objections reaised by the respondents were rejected. Being aggrieved by the impugned order passed by the Fourth Additional District Judge, Gwalior present revision has been preferred.
Counsel for the respondent has raised a preliminary objection that the revision itself is not maintainable. It is submitted that against the order passed u/s 34 of the A & C Act, appeal is provided u/s 37 of the A & C Act.
Learned counsel for the respondent submits that in exercise of powers conferred by Section 82 of the A & C Act, High Court of Madhya Pradesh has framed rules which are known as the Madhya Pradesh Arbitration Rules, 1997 (which shall be referred hereinafter to as "Rules"). It is submitted that as per rule 9 of the Rules, the provisions of section 115 of the C.P.C. shall not apply to the arbitration proceedings before a court. Rule 9 of the rules is reproduced herein below:
9 (1) Save as otherwise expressly provided in the Act of these Rules, the following provisions of the Code of Civil Procedure, 1908 (V of 1908) shall apply to the proceedings before a Court in so far as they may be applicable thereto: namely :-
(i) Sections 28,31,35,35A,35B,107,133,135,148A,149,151 and 152, and;
(ii) Order III, V, VI, IX, XIII, XIV, XVI, to XIX, XXIV and XLI.
(2) (a) For the purpose of facilitating the application of the provisions referred to under sub-section (1) the Court may construe them with such alterations, not affecting the substance, as may be necessary or proper to adopt to the matters before it; and
(b) The Court may, for sufficient reasons proceed otherwise than in accordance with the said provisions if it is satisfied that the interests of the parties shall not thereby be prejudiced.
From scrutiny of sub-rule (2) of Rule 9 of the Rules, it is evident that the court may, for sufficient reasons, to proceed otherwise than in accordance with the said provisions, if it is satisfied that the interests of the parties shall not thereby be prejudiced.
From perusal of the record, it is evident that the award has been passed by the Arbitration Tribunal and the validity of the same has been challenged by the respondent u/s 34 of the A & C Act. The maintainability of the objection filed by respondents u/s 34 of the A & C Act is challenged by the petitioner by moving an application which has been dismissed by the court below. No order has been passed by the learned court below on the objections raised by the respondents u/s 34 of the A & C Act. On the contrary, application which has been dismissed by the court below, filed by the petitioner, raises a preliminary ground for rejection of the objections filed by the respondent. If this revision is allowed by this Court and the objections raised by the petitioner are allowed, the matter may be finally decided before the learned court below.
This Court is satisfied that by entertaining the present revision in exercise of powers conferred u/s 115 C.P.C, the interest of the parties shall not be prejudiced. In view of this, revision is maintainable. Objection raised by the respondent regarding maintainability of the revision is turned down.
So far as the objection of the respondent is concerned, the scope u/s 34 of the A & C Act for setting aside the arbitral award is limited. Award can be set aside by the Court, if the party making the application furnishes proof that
(a) (i) party was under some incapacity; or
(ii). the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for the time being in force; or
(iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or
(iv) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains a decision on matters beyond the scope of the submission to arbitration.
(v) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate or, failing such agreement, was not is accordance with this Part; or
(b) the Court finds that -
(i) the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force, or
(ii) the arbitral award is in conflict with the public policy of India.
From perusal of the aforesaid, it is evident that application for setting aside the arbitral award can only be filed on any of the grounds mentioned hereinabove. Learned counsel for the respondent submits that the application was filed u/s 34(2) (b) (ii) of the A & C Act which lays down that the award is in conflict with the policy of India.
In the A & C Act, to explain sub-clause (ii) of section 34 (2)(b) of the A & C Act, an explanation is given according to which an award is in conflict with the policy of India if the making of the award was indulged or affected by fraud or corruption or was in violation of Sections 75 and 81 of the A&C Act. Section 75 of the A & C Act lays down that the conciliator and the parties shall keep confidential all matters relating to the conciliation proceedings. Confidentiality shall, extend also to the settlement agreement, except where its decision is necessary for the purposes of implementation and enforcement. Section 81 of the A& C Act lays down admissibility of evidence in other proceedings.
In the matter of Oil and Natural Gas Corporation Ltd. Vs. SAW Pipes Ltd. reported in 2003 (3) Supreme 449, the hon''ble Apex Court had an occasion to deal with the phrase "public policy of India" mentioned u/s 34(2) (b) (ii) of the A & C Act and has held that the award would be set aside if it is contrary to;-
a) Fundamental policy of Indian law; or
b) The interest of India; or
c) Justice of morality; or
d) In addition if it is patently illegal.
It was further observed that illegality must go to the root of the matter and if the illegality is of trivial nature, it cannot be held that the award is against the public policy. Award could be set aside if it is so unfair and unreasonable that is shocks the conscience of the court. Such award is opposed to public policy and is required to be adjudged void.
From perusal of the order impugned herein, it appears that all the aforesaid aspects of the case has not been considered by the learned court below while disposing of the objections filed by the petitioner.
In view of this, revision petition is allowed. Impugned order dated 08/10/2003 is set aside and the matter is sent back to the trial Court with a direction to dispose of the application filed by the petitioner afresh after taking into consideration the law laid down by hon''ble the Apex Court in the matter of Oil and Natural Gas Corporation Ltd. (supra). No order as to costs.