Monday, October 26, 2009

INDIAN HUME PIPE CO. LTD. Versus STATE OF RAJASTHAN

Arbitration and Conciliation Act, 1996
Section 29 - Civil Procedure Code, 1908, Section 34 - Contract - Arbitration clause - Dispute arose - Award allowing the claim of the appellant with interest for pre-reference period, pendente lite interest and future interest - Objections by respondent allowed by District judge to the extent of pendente lite, future interest and compound interest - Review filed - Award made rule of the court - Appellant awarded 9% interest from the date of decree of the award - Appeal filed - High Court observed that it was not mandatory for the arbitrator to award interest at all three stages - However in counter claim preferred by the respondents pendente lite and future interest granted by the arbitrators not disturbed by both District Court and High Court - Whether denial of same to appellant justified. Held if any amount is wrongly withheld aggrieved party's claim for interest is justified as per mandate of section 34 CPC and 29 of 1996 Act. Further held that refusal to grant pendente lite and future interest to appellant and allowing the same to respondent led to unjustified discrimination. Appeal allowed.


Supreme Court of India

CIVIL APPEAL NO. 6971 of 2009

Judge(s): V.S. SIRPURKAR ,DEEPAK VERMA

Date of Judgment: 19 October, 2009

INDIAN HUME PIPE CO. LTD. Versus STATE OF RAJASTHAN

JUDGMENT

Deepak Verma, J.

1. Leave granted.

2. This appeal arises out of order and Judgment dated 15.5.2007 passed by learned Single Judge of High Court of Judicature for Rajasthan, Jaipur Bench in SB Civil Miscellaneous Appeal No. 1631/2006, whereby and whereunder the appeal preferred by appellant herein under Section 39 of the Arbitration Act, 1940 (hereinafter shall be referred to as 'the Act') has been dismissed, which arose out of the orders dated 13.09.2005 & 26.11.2005 passed by District Judge, Jaipur in Arbitration Case No. 143/1998 & Misc. Arbitration Application No. 443/2005 respectively.

3. Thumb nail sketch of the facts of the case is as under:

4. Respondent/State of Rajasthan had issued notice inviting tender on 03.01.1981 and 11.02.1981 for grant of contract for laying PSC pipeline in Kota Division. Appellant herein, pursuant to the said notice submitted its tender.

5. The tender of the appellant being lowest was accepted on 18.04.1982. The agreement, thereafter, was executed between the parties on 13.12.1982. The said Agreement contained an arbitration clause, to be invoked in case of any dispute arising between the parties.

6. Since a dispute between the parties arose, the said arbitration clause was invoked and the matter was referred to three arbitrators.

7. They entered into the reference on 12.02.1995 and gave their Award on 12.12.1997.

8. The arbitrators substantially allowed the claim of the appellant together with interest for pre-reference on outstanding payment, pendente lite interest and future interest from the date of award till the date of payment or the date of making of the award a rule of Court, whichever is earlier.

9. Feeling aggrieved by the said award, respondent-State of Rajasthan preferred objections under Section 30 read with Section 33 of the Act before District Judge, Jaipur City. The appellant
herein filed its reply to the said objections and prayed that the award be made rule of the Court.

10. The matter was heard by the learned District Judge and vide order dated 13.09.2005 the objections preferred by respondent were allowed only to the extent of awarding pendente lite
interest, future interest and compound interest on the total amount awarded by the arbitrators.

11. Since, while passing the said impugned order no direction was made by the learned District Judge to make the said award a rule of the Court and the pendente lite and future interest awarded by the arbitrators were disallowed, thus, an application for review was filed by the appellant. The same came to be heard and disposed of on 26.11.2005. The award was made rule of the Court and appellant was awarded only simple interest at the rate of 9% per annum from the date of decree of the award. It is against the aforesaid two orders and judgments passed by learned District Judge, appellant was constrained to carry the matter further before the learned Single Judge by filing Miscellaneous Appeal as mentioned hereinabove.

12. Learned Single Judge considered the matter from all angles and came to the conclusion that even though the arbitrators have got the power to grant interest at all the three stages i.e. pre-reference, pendente lite interest and future interest but it is not mandatory for the arbitrators to have awarded the same.

13. However, the learned Single Judge completely lost sight of the fact that on the counterclaim having been preferred by the respondent, the same, that is, pendente lite and future interest was awarded by the arbitrators and the same was not disturbed either by the learned District Judge or by the learned Single Judge, yet, on the same set of facts they were denied to the appellant. Thus, feeling aggrieved by the said orders, this appeal has been preferred.

14. By a long catena of cases decided by this Court from time to time, it is too well settled that arbitrators have the competence, jurisdiction and power to award interest for the period from the date of award to date of payment as also for pre- reference, pendente lite and post award. The only caveat is that the amount of interest so awarded should be reasonable and agreement between the parties should not prohibit grant of such interest.

15. In the light of several judgments of this Court, the question projected in this appeal is no more res integra.

16. The question with regard to grant of interest by an arbitrator for the period from the date of award to date of payment stands settled by a judgment of this Court in the case of Hindustan Construction Co. Ltd. v. State of Jammu & Kashmir reported in [JT 1992 (5) SC 325 : 1992 (4) SCC 217]. The aforesaid question has been dealt with by this Court in para 5 of the said judgment reproduced hereinbelow:
'5. The question of interest can be easily disposed of as it is covered by recent decisions of this Court. It is sufficient to refer to the latest decision of a five Judge bench of this Court in Secretary, Irrigation Department, Govt. of Orissa v. G.C. Roy [JT 1991 (6) SC 309]. Though the said decision deals with the power of the arbitrator to award interest pendente lite, the principle of the decision makes it clear that the arbitrator is competent to award interest for the period commencing with the date of award to the date of decree or date of realization, whichever is earlier. This is also quite logical for, while award of interest for the period prior to an arbitrator entering upon the reference is a matter of substantive law, the grant of interest for the post-award period is a matter of procedure. Section 34 of Code of Civil Procedure provides both for awarding of interest pendente lite as well as for the post-decree period and the principle of Section 34 has been held applicable to proceedings before the arbitrator, though the section as such may not apply. In this connection, the decision in Union of India v. Bungo Steel Furniture (P) Ltd. [1967 (1) SCR 324] may be seen as also the decision in Gujarat Water Supply & Sewerage Board v. Unique Erectors (Gujarat) P. Ltd. [JT 1989 (1) SC 285] which upholds the said power though on a somewhat different reasoning. We, therefore, think that the award on Item No. 8 should have been upheld.'

17. The other question with regard to grant of interest by the arbitrator at three different stages that is pre-reference, pendente lite and post award also stands settled by judgment of this Court in the case of Bhagawati Oxygen Ltd. etc. v. Hindustan Copper Ltd. etc. reported in [JT 2005 (4) SC 73 : 2005 (6) SCC 462]. The said question has succinctly been settled in paras 36, 37, 38 and 39 reproduced hereinbelow:
'36. The last question relates to payment of interest. The arbitrator awarded interest to BOL at the universal rate of eighteen per cent for all the three stages, pre-reference period, pendente lite and post-award period. It is not disputed that in the arbitration agreement there is no provision for payment of interest. The learned Single Judge as well as the Division Bench were right in observing that the arbitrator, in the facts and circumstances, could have awarded interest. The arbitrator had granted interest at the rate of eighteen per cent on the ground of loan so advanced by HCL to BOL at that rate.
37. Now Section 34 of the Code of Civil Procedure has no application to arbitration proceedings since the arbitrator cannot be said to be a 'court' within the meaning of the Code. But an arbitrator has power and jurisdiction to grant interest for all the three stages provided the rate of interest is reasonable.
38. So far as interest for pre-reference period is concerned, in view of the conflicting decisions of this Court, the matter was referred to a larger Bench in Executive Engineer, Dhenkanal Minor Irrigation Division v. N.C. Budharaj [JT 2001 (1) SC 486]. The Court, by majority, held that an arbitrator has power to grant interest for pre-reference period provided there is no prohibition in the arbitration agreement excluding his jurisdiction to grant interest. The forum of arbitration is created by the consent of parties and is a substitute for conventional civil court. It is, therefore, of unavoidable necessity that the parties be deemed to have agreed by implication that the arbitrator would have power to award interest in the same way and same manner as a Court.
39. Regarding interest pendente lite also, there was cleavage of opinion. The question was, therefore, referred to a larger Bench in Secy., Irrigation Deptt., Govt. of Orissa v. G.C. Roy [JT 1991 (6) SC 349]. The Court considered several cases and laid down the following principles:
'43. The question still remains whether arbitrator has the power to award interest pendente lite, and if so on what principle. We must reiterate that we are dealing with the situation where the agreement does not provide for grant of such interest nor does it prohibit such grant. In other words, we are dealing with a case where the agreement is silent as to award of interest. On a conspectus of aforementioned decisions, the following principles emerge:
(i) A person deprived of the use of money to which he is legitimately entitled has a right to be compensated for the deprivation, call it by any name. It may be called interest, compensation or damages. This basic consideration is as valid for the period the dispute is pending before the arbitrator as it is for the period prior to the arbitrator entering upon the reference. This is the principle of Section 34, Civil Procedure Code and there is no reason or principle to hold otherwise in the case of arbitrator.
(ii) An arbitrator is an alternative forum for resolution of disputes arising between the parties. If so, he must have the power to decide all the disputes or differences arising between the parties. If the arbitrator has no power to award interest pendente lite, the party claiming it would have to approach the court for that purpose, even though he may have obtained satisfaction in respect of other claims from the arbitrator. This would lead to multiplicity of proceedings.
(iii) An arbitrator is the creature of an agreement. It is open to the parties to confer upon him such powers and prescribe such procedure for him to follow, as they think fit, so long as they are not opposed to law. (The proviso to Section 41 and Section 3 of the Arbitration Act illustrate this point.) All the same, the agreement must be in conformity with law. The arbitrator must also act and make his award in accordance with the general law of the land and the agreement.
(iv) Over the years, the English and Indian courts have acted on the assumption that where the agreement does not prohibit and a party to the reference makes a claim for interest, the arbitrator must have the power to award interest pendente lite, Thawardas Pherumal v. Union of India [1955 (2) SCR 48] has not been followed in the later decisions of this Court. It has been explained and distinguished on the basis that in that case there was no claim for interest but only a claim for unliquidated damages. It has been said repeatedly that observation in the said judgment were not intended to lay down any such absolute or universal rule as they appear to, on first impression. Until Executive Engineer (Irrigation) v. Abhaduta Jena case [JT 1987 (4) SC 8] almost all the courts in the country had upheld the power of the arbitrator to award interest pendente lite. Continuity and certainty is a highly desirable feature of law.
(v) Interest pendente lite is not a matter of substantive law, like interest for the period anterior to reference (pre-reference period). For doing complete justice between the parties, such power has always been inferred.'

18. In the light of the aforesaid judgments of this Court we have no hesitation to hold that impugned orders passed by learned District Judge as also by learned Single Judge of High Court cannot be sustained in law.

19. Even though learned counsel for respondent tried to advance arguments that in this appeal no case for interference has been made out but at last, in the teeth of aforesaid judgments peevishly conceded that the impugned orders, cannot be sustained in law.

20. Learned Single Judge also committed a grave error in coming to the conclusion that even though arbitrator was competent to award interest but it was not mandatory on his part to do so. The said reasoning does not appeal to be legally tenable and convincing, for the simple reason, if the amount has been withheld wrongly and without any justification then of course the aggrieved party would be fully justified in claiming interest. This is the mandate of Section 34 of the Code of Civil Procedure as also Section 29 of the Act.

21. Both the aforesaid provisions make it abundantly clear that power to award interest at all stages vests with the arbitrators. Arbitrators are bound to make the award in accordance with law and if there is no embargo or legal hurdle in awarding interest for the aforesaid three stages mentioned hereinabove then there cannot be any justifiable reason to deny the same.

22. It is also pertinent to mention here that the interest awarded by learned District Judge and learned Single Judge to the counter claim of respondent was not disturbed but it was set aside only for the appellant. If appellant was not entitled to claim interest then how respondent-State would get powers or competence to receive it. Same doctrine should have been made applicable for respondent's case also. Two persons, similarly situated, could not have been treated differently as the same may amount to discrimination.

23. In the light of the aforesaid discussion, we allow the appeal and set aside and quash the impugned orders passed by learned District Judge in so far as they refuse to grant interest pendente lite and future and also by learned Single Judge of High Court and restore the award together with interest as awarded by the arbitrators.

24. Respondent to bear the cost of litigation throughout. Counsel's fee Rs.10,000/-.

Thursday, October 22, 2009

M/S. S.B.P. AND COMPANY VERSUS M/S. PATEL ENGINEERING LTD. AND ANOTHER B.T. PATIL AND SONS BELGAUM CONSTRUCTION LTD. VERSUS M/S. PATEL ENGINEERING LTD. AND ANOTHER

Arbitration and Conciliation Act, 1996, Section 11(6) -- Constitution of India, 1950, Article 136 --(i) The power exercised by the Chief Justice of the High Court or the Chief Justice of India under Section 11(6) of the Act is not an administrative power. It is a judicial power.

(ii) An order passed by the Chief Justice of the High Court or by the designated Judge of that Court is a judicial order, an appeal will lie against that order only under Article 136 of the Constitution to the Supreme Court. 


SUPREME COURT OF INDIA

(G.S. SINGHVI & DR. B.S. CHAUHAN, JJ.)

M/S. S.B.P. AND COMPANY VERSUS M/S. PATEL ENGINEERING LTD. AND ANOTHER

B.T. PATIL AND SONS BELGAUM CONSTRUCTION LTD. VERSUS M/S. PATEL ENGINEERING LTD. AND ANOTHER

Civil Appeal No.4168 of 2003 with Civil Appeal No.4169 of 2003-Decided on 21-10-2009.

Arbitration – Appointment of arbitrator

Order
G.S. Singhvi, J.-In compliance of the direction given by seven-Judge Bench in S.B.P. & Company v. Patel Engineering Ltd. and another (2005) 8 SCC 618, these appeals have been listed for disposal in the light of the principles laid down in that judgment.

2. In the special leave petitions, out of which these appeals arise, the appellants had challenged orders dated 3.2.2003 passed by the Division Bench of the Bombay High Court whereby it held that the writ petitions filed against the orders passed by the learned designated Judge of that Court appointing Shri Justice M.N. Chandurkar (Retired) as the third arbitrator for resolution of the disputes between the appellants and respondent No.1 are not maintainable. For this purpose, the Division Bench relied upon the judgment of this Court in Konkan Railway Corporation Ltd. and others v. Mehul Construction Company (2000) 7 SCC 201 , which was subsequently approved by a Constitution Bench in Konkan Railway Corporation Ltd. and another v. Rani Construction Pvt. Ltd. (2002) 2 SCC 388. The ratio of the Constitution Bench judgment was that the power exercised by the Chief Justice or any person or institution designated by him under Section 11(6) of the Arbitration and Conciliation Act, 1996 (for short, `the Act') is purely administrative and the measures taken under that section are not open to be challenged by the aggrieved party by resorting to intermediary proceedings. The judgment of the Constitution Bench was overruled by the seven-Judge Bench in S.B.P. & Company v. Patel Engineering Ltd. and another (supra) and it was held that the power exercised by the Chief Justice of the High Court or the Chief Justice of India under Section 11(6) of the Act is a judicial power and not an administrative power and further that an order passed by the Chief Justice of the High Court or by the designated Judge of that Court can be challenged only under Article 136 of the Constitution.

3. After the judgment of the larger Bench, the appellants filed I.A. Nos. 1 and 2 of 2006 for leave to amend the memorandums of appeal so as to enable them to make a prayer for setting aside orders dated 18.11.2002 passed by the learned designated Judge of the High Court in Arbitration Application Nos. 114 of 2002 and 90 of 2002. At the commencement of hearing of the appeals on 6.10.2009, the prayer of the appellants was granted.

4. In the light of the above, we shall now consider whether orders dated 18.11.2002 passed by the learned designated Judge of the Bombay High Court under Section 11(6) of the Act appointing Shri Justice M.N. Chandurkar (Retired) as third arbitrator is legally correct.

Background facts

5. In March, 1992, the Government of Maharashtra awarded contract to respondent No.1 for execution of works relating to Stage IV of the Koyna Hydroelectric Project. Respondent No.1 sub-contracted a portion of that work i.e., construction of civil works from Lake Intake to Emergency Valve Tunnel - K.H.E.P. Stage IV - I.C.B. No.1 to the appellant and M/s. B.T. Patil & Sons (Construction) Ltd., Belgaum (herein after described as "B.T. Patil & Sons"). For this purpose, the parties entered into two agreements on 15.10.1992 viz., sub-contract agreement and piece work agreement. Both the agreements contained identical clauses for resolution of disputes and differences between the parties by arbitration. For the sake of convenient reference, Clause 19 of the piece work agreement is reproduced below:

"The continuance of this piece work agreement/contract or at any time after the termination thereof, any difference or dispute shall arise between the parties hereto in regard to the interpretation of any of the provisions herein contained or act or thing in relation to this agreement/contract, such difference or dispute shall be forthwith referred to two Arbitrators for Arbitration in Bombay one to be appointed by each party with liberty to the Arbitrators in case of differences or their failure to reach an agreement within one month of the appointment, to appoint an umpire residing in Bombay and the award which shall be made by two Arbitrators or umpire as the case may be shall be final, conclusive and binding on the parties hereto. If either party to the difference or dispute shall fail to appoint an arbitrator within 30 calendar days after notice in writing having been given by the parties or shall appoint an arbitrator who shall refuse to act then the arbitrator appointed by the other party shall be entitled to proceed with the reference as a Sole Arbitrator and to make final decision on such difference or dispute and the award made as a result of such arbitration shall be a condition precedent to any right of action against any two parties hereto in respect of any such difference and dispute."

(emphasis added)

6. In October 1996, some disputes and differences arose between the Government of Maharashtra and respondent No.1 with regard to contract dated 10.3.1992. The panel of three arbitrators appointed by the parties passed unanimous awards on 11.2.2000 requiring the State Government to pay Rs.24,09,25,965/- to respondent No.1. The State Government challenged those awards but, later on, withdrew its challenge and paid the amount to respondent No.1.

7. On 3.7.2001, the appellants through their power of attorney holder, Balasaheb B. Patil served a notice upon respondent No.1 requiring it to pay the amount allegedly due to them, but the latter did not comply with their demand. After three months, the appellants invoked the arbitration clauses enshrined in the sub-contract agreement and piece work agreement and issued letter dated 3.10.2001 appointing Shri T.G. Radhakrishna (retired Chief Engineer) (respondent No.2 herein) as an arbitrator on their behalf. In its response dated 1.11.2001, respondent No.1 denied the claim of the appellants and, at the same time, appointed Shri S.N. Huddar, Joint Secretary, Irrigation Department, Government of Maharashtra as an arbitrator on its behalf. However, vide letter dated 1.2.2002, Shri Huddar declined to arbitrate in the matter by stating that he had remained associated with Kyona Project as Superintending Engineer and Chief Engineer. Thereafter, respondent No.1 sent letter dated 26.2.2002 to Shri S.L. Jain of S & S Consultants, Bhopal with the request to act as an arbitrator on its behalf. Shri Jain communicated his consent vide letter dated 27.2.2002. On the same day, respondent No.1 informed respondent No.2 that in terms of Section 15(2) of the Act, it was entitled to appoint a substitute in place of Shri S.N. Huddar and had, in fact, appointed Shri S.L. Jain as an arbitrator and the latter had consented to such an appointment. On 7.3.2002, the power of attorney holder of the appellants informed respondent No.1 that appointment of Shri S.L. Jain as replacement arbitrator is contrary to the terms of sub-contract agreement and piece work agreement.

8. In the meanwhile, power of attorney holder of the appellants sent letter dated 22.1.2002 to respondent No.2 and Shri S.N. Huddar requesting them to appoint the third arbitrator. On his part, respondent No.2 suo motu sent letter dated 21.2.2002 informing the parties that in view of Shri Huddar's refusal to act as an arbitrator on behalf of respondent No.1, he had become the Sole Arbitrator and asked them to appear at Mumbai for a preliminary meeting.

9. After his appointment as an arbitrator on behalf of respondent No.1, Shri S.L. Jain sent letter dated 11.3.2002 to respondent No.2 and suggested the names of three retired Bombay High Court judges for appointment as Presiding Arbitrator. In his reply dated 25.3.2002, respondent No.2 claimed that Section 15(2) of the Act has no application in the case and that in terms of Clause 18 of the sub-contract agreement and Clause 19 of the piece work agreement, he was entitled to act as the Sole Arbitrator.

10. At that stage, respondent No.1 filed Arbitration Application Nos.114 of 2002 and 90 of 2002 under Section 11 of the Act for appointment of the third arbitrator by asserting that in view of refusal of Shri S.N. Huddar to act as an arbitrator, it had appointed Shri S.L. Jain as a substitute arbitrator in terms of Section 15(2) of the Act and in that view of the matter respondent No.2 was not entitled to act as the Sole Arbitrator. The designated Judge of the Bombay High Court allowed both the applications and appointed Shri Justice M.N. Chandurkar (Retired) as the third arbitrator. The learned designated Judge noticed the arguments made on behalf of the parties, the provisions of Section 15 of the Act and observed:-

"Section 15 is a new provision. Sub-section (1) and (2) thereof correspond to Article 155 of the UNCITRAL model Law. Sub -section (2) of section 15 provides that where the mandate of arbitrator is terminated, a substitute arbitrator shall be appointed according to the rules that were applicable to the appointment of the arbitrator being replaced. Thus the Legislature clearly intended that upon termination of the mandate of an arbitrator, a substitute arbitrator shall be appointed in accordance with the same rules as were applicable to the appointment of the original arbitrator. Therefore the arbitrator appointed by the other party is not entitled to act as the sole arbitrator in view of this clear language of section 15(2). This can be compared to the old provision of section 9 of the 1940 Act providing that unless a different intention is expressed in the agreement the court has power to appoint a new arbitrator. The words used in sub-section (2) of section 15 do not admit of any such exception. The decisions relied upon by Dr. Tulzapurkar have no application to the facts of the present case. In Datar Switchgears Ltd. v. Tata Finance Ltd. and Anr. While construing section 11(6) of the 1996 Act, the court held that if one party demands the opposite party to appoint an arbitrator and the opposite party does not make an appointment within30 days of demand being made by the other party, the right to make the appointment does not get automatically forfeited after expiry of 30 days. If the opposite party makes an appointment even after 30 days of the demand, but before the first party has moved the court under section 11, that would be sufficient. Only then the right of the opposite party ceases. It is in this context that the court observed in para 23that "when parties have entered into a contract and settled on a procedure, due importance has to be given to such procedure even though rigor of the doctrine of `Freedom of contract' has been whittled down by various labour and special welfare legislation, still the court has to respect the terms of the contract entered into by parties and endeavour to give importance and effect to it. When the party has not disputed the arbitration clause, normally he is bound by it and obliged to comply with the procedure laid down under the said clause". This case has no bearing on the issue involved in the instant case. The other case cited by Dr. Tulzapurkar in Open Sea Maritimes Inc. v. R. Pyarelal International Pvt. Ltd. Is distinguishable on facts. In that case respondents had failed to make appointment of an arbitrator even after the notice period. The court held that if the party fails to appoint an arbitrator even after the notice then the Arbitrator appointed by the other party can act a sole arbitrator and pass the award. The court referred to clause 24 of the agreement between the parties which provide that if the other party fails to appoint an arbitrator in spite of the notice, the arbitrator appointed shall be entitled to act as the sole arbitrator as such procedure was agreed upon between the parties. The case before Patankar J. was under Part II of the Act. In the instant case, in view of the provisions contained in section 15(2) of the Act, upon withdrawal of the arbitrator Shri Huddar the petitioners had right to appoint a new arbitrator as per the Rules that were applicable to appointment of arbitrator."

11. The appellants challenged the orders of the learned designated Judge in two separate writ petitions, but could not persuade the Division Bench of the High Court to entertain their prayer for nullifying the appointment of Shri Justice M.N. Chandurkar as the third arbitrator. The Division Bench referred to the judgments of this Court in Konkan Railway Corporation Ltd. and others v. Mehul Construction Company (supra) and Konkan Railway Corporation Ltd. and another v. Rani Construction Pvt. Ltd. (supra), and held that the writ petitions are not maintainable against the orders passed by the designated Judge, which were administrative in nature. However, liberty was given to the appellants to raise the issue relating to appointment of the third arbitrator before the Arbitral Tribunal.

12. The Constitution Bench, which heard the special leave petitions filed by the appellants against the orders of the High Court, opined that the judgment rendered by an earlier Constitution Bench in Konkan Railway Corporation Ltd. and another v. Rani Construction Pvt. Ltd. (supra), may require reconsideration and directed that the matter be placed before a larger Bench. Thereafter, the cases were heard by a seven-Judge Bench. By majority judgment, the larger Bench overruled the Constitution Bench judgment in Konkan Railway Corporation Ltd. v. Rani Construction Pvt. Ltd. (supra), and held that the power exercised by the Chief Justice of the High Court or the Chief Justice of India under Section 11(6) of the Act is a judicial power and not an administrative power and that an order passed by the Chief Justice of the High Court or by the designated Judge of that High Court is appealable under Article 136 of the Constitution. The conclusions of the majority are contained in paragraph 47 of the judgment, the relevant portions of which are extracted below:

"47. We, therefore, sum up our conclusions as follows:

(i) The power exercised by the Chief Justice of the High Court or the Chief Justice of India under Section 11(6) of the Act is not an administrative power. It is a judicial power.

(ii) The power under Section 11(6) of the Act, in its entirety, could be delegated, by the Chief Justice of the High Court only to another Judge of that Court and by the Chief Justice of India to another Judge of the Supreme Court.

(iii) In case of designation of a Judge of the High Court or of the Supreme Court, the power that is exercised by the designated Judge would be that of the Chief Justice as conferred by the statute.

(iv) The Chief Justice or the designated Judge will have the right to decide the preliminary aspects as indicated in the earlier part of this judgment. These will be his own jurisdiction to entertain the request, the existence of a valid arbitration agreement, the existence or otherwise of a live claim, the existence of the condition for the exercise of his power and on the qualifications of the arbitrator or arbitrators. The Chief Justice or the designated Judge would be entitled to seek the opinion of an institution in the matter of nominating an arbitrator qualified in terms of Section 11(8) of the Act if the need arises but the order appointing the arbitrator could only be that of the Chief Justice or the designated Judge.

(v) xxx xxxx xxxx

(vi) Once the matter reaches the Arbitral Tribunal or the sole arbitrator, the High Court would not interfere with the orders passed by the arbitrator or the Arbitral Tribunal during the course of the arbitration proceedings and the parties could approach the Court only in terms of Section 37 of the Act or in terms of Section 34 of the Act.

(vii) Since an order passed by the Chief Justice of the High Court or by the designated Judge of that Court is a judicial order, an appeal will lie against that order only under Article 136 of the Constitution to the Supreme Court.

(viii) xxxx xxxx xxxx

(ix) In a case where an Arbitral Tribunal has been constituted by the parties without having recourse to Section 11(6) of the Act, the Arbitral Tribunal will have the jurisdiction to decide all matters as contemplated by Section 16 of the Act.

(x ) xxxx xxxx xxxx

(xi) xxxx xxxx xxxx

(xii) The decision in Konkan Rly. Corpn. Ltd. v. Rani Construction (P) Ltd. is overruled."

Arguments

13. Shri K.K. Venugopal, learned senior counsel appearing for the appellants argued that the arbitration clauses contained in the two agreements are binding on the parties and in view of refusal of Shri S.N. Huddar to act as an arbitrator on behalf of respondent No.1, the arbitrator appointed by the appellants i.e., respondent No.2 became the Sole Arbitrator and as such the learned designated Judge did not have the jurisdiction, power or authority to appoint the third arbitrator. Shri Venugopal emphasized that the appointment of Shri S.L. Jain as a substitute arbitrator was legally impermissible because there is no provision in the arbitration clauses for appointment of a substitute arbitrator. Learned senior counsel argued that the provision contained in Section 15(2) of the Act can be invoked for appointment of a substitute arbitrator only if the mandate of an arbitrator gets terminated on account of his withdrawal from office or by or pursuant to an agreement of the parties and not in a case where the arbitrator appointed by either party refuses to act as such and, in any case, the provision contained in that section cannot be invoked for nullifying the agreement between the parties which does not provide for appointment of a substitute arbitrator. In support of his arguments, Shri Venugopal relied upon the judgments in S.B.P. & Company v. Patel Engineering Limited and another (supra), ACE Pipeline

Contracts (P) Ltd. v. Bharat Petroleum Corpn. Ltd. (2007) 5 SCC 304, Northern Railway Admn., Ministry of Railway, New Delhi v. Patel Engineering Company Ltd. 2008 (11) SCALE 500 and Union of India v. M/s. Singh Builders Syndicate.

14. Shri Dushyant Dave, learned senior counsel appearing for respondent No.1, invited our attention to letter dated 1.2.2002 written by Shri S.N. Huddar expressing his inability to act as an arbitrator and argued that his client did not commit any illegality by appointing Shri S.L. Jain as a substitute arbitrator. Shri Dave submitted that the appointment of an arbitrator becomes effective only after he consents for the same and if he refuses to accept the appointment, the party appointing such person as an arbitrator has the freedom to appoint another arbitrator, even though there may not be any express provision to that effect in the agreement. In support of this argument, Shri Dave relied upon the judgment of this Court in Yashwith Constructions (P) Ltd. v. Simplex Concrete Piles India Ltd. (2006) 6 SCC 204. Shri Dave further argued that in view of the plain language of Section 15, respondent No.1 had the right to appoint a substitute arbitrator and respondent No.2 could not act as the Sole Arbitrator merely because Shri S.N. Huddar who was originally appointed as an arbitrator on behalf of respondent No.1 refused to accept the appointment. Shri Dave submitted that learned designated Judge of the High Court did not commit any error by appointing the third arbitrator because respondent No.2 did not agree to the suggestion of Shri S.L. Jain to appoint third arbitrator from the panel of three retired Judges of the High Court. Relevant provisions of the Act and their analysis 11. Appointment of arbitrators-

(1) A person of any nationality may be an arbitrator, unless otherwise agreed by the parties.

(2) Subject to sub-section (6), the parties are free to agree on a procedure for appointing the arbitrator or arbitrators.

(3) Failing any agreement referred to in sub-section (2), in an arbitration with three arbitrators, each party shall appoint one arbitrator, and the two appointed arbitrators shall appoint the third arbitrator who shall act as the presiding arbitrator.

(4) If the appointment procedure in sub-section (3) applies and—

(a) a party fails to appoint an arbitrator within thirty days from the receipt of a request to do so from the other party; or

(b) the two appointed arbitrators fail to agree on the third arbitrator within thirty days from the date of their appointment, the appointment shall be made, upon request of a party, by the Chief Justice or any person or institution designated by him.
(5) Failing any agreement referred to in sub-section (2), in an arbitration with a sole arbitrator, if the parties fail to agree on the arbitrator within thirty days from receipt of a request by one party from the other party to so agree the appointment shall be made, upon request of a party, by the Chief Justice or any person or institution designated by him.

(6) Where, under an appointment procedure agreed upon by the parties,--

(a) a party fails to act as required under that procedure; or

(b) the parties, or the two appointed arbitrators, fail to reach an agreement expected of them under that procedure; or

(c) a person, including an institution, fails to perform anyfunction entrusted to him or it under that procedure, a party may request the Chief Justice or any person or institution designated by him to take the necessary measure, unless the agreement on the appointment procedure provides other means for securing the appointment.

(7) xxx xxx xxx

(8) The Chief Justice or the person or institution designated by him, in appointing an arbitrator, shall have due regard to-

(a) any qualifications required of the arbitrator by the agreement of the parties;

and

(b) other considerations as are likely to secure the appointment of an independent and impartial arbitrator.

(9) to (12) xxx xxx xxx

12. Grounds for challenge.—

(1) and (2) xxx xxx xxx

(3) An arbitrator may be challenged only if—

(a) circumstances exist that give rise to justifiable doubts as to his independence or impartiality, or

(b) he does not possess the qualifications agreed to by the parties.

(4) xxx xxx xxx

13. Challenge procedure.—

(1) and (2) xxx xxx xxx
(3) Unless the arbitrator challenged under sub-section (2) withdraws from his office or the other party agrees to the challenge, the arbitral tribunal shall decide on the challenge.

(4) to (6) xxx xxx xxx

14. Failure or impossibility to act.—

(1) The mandate of an arbitrator shall terminate if—

(a) he becomes de jure or de facto unable to perform his functions or for other reasons fails to act without undue delay; and

(b) he withdraws from his office or the parties agree to the termination of his mandate.

(2) If a controversy remain concerning any of the grounds referred to in clause

(a) of sub-section (1), a party may, unless otherwise agreed by the parties, apply to the Court to decide on the termination of the mandate.

(3) If, under this section or sub-section (3) of section 13,an arbitrator withdraws from his office or a party agrees to the termination of the mandate of an arbitrator, it shall not imply acceptance of the validity of any ground referred to in this section or sub-section (3) of section 12.

15. Termination of mandate and substitution of arbitrator. –

(1) In addition to the circumstances referred to in section 13 or section 14, the mandate of an arbitrator shall terminate—

(a) where he withdraws from office for any reason; or

(b) by or pursuant to agreement of the parties.

(2) Where the mandate of an arbitrator terminates, a substitute arbitrator shall be appointed according to the rules that were applicable to the appointment of the arbitrator being replaced.

(3) Unless otherwise agreed by the parties, where an arbitrator is replaced under sub-section (2), any hearings previously held may be repeated at the discretion of the arbitral tribunal.

(4) Unless otherwise agreed by the parties, an order or ruling of the arbitral tribunal made prior to the replacement of an arbitrator under this section shall not be invalid solely because there has been a change in the composition of the arbitral tribunal.

15. An analysis of the scheme of Section 11 which relates to appointment of arbitrators shows that in terms of sub-section (1) thereof, a person of any nationality can be appointed as an arbitrator unless there is a contra agreement between the parties. Sub-section (2) lays down that the parties are free to agree on a procedure for appointing the arbitrator or arbitrators. This is subject to the provision contained in sub-section (6). Sub-section (3) lays down that if there is no agreement between the parties in an arbitration with three arbitrators, each party shall appoint one arbitrator, and the two arbitrators appointed by the parties shall appoint the third arbitrator who shall act as the Presiding Arbitrator. Sub-section (4) lays down that if a party fails to appoint an arbitrator within 30 days from the date of receipt of request to do so from the other party or the two arbitrators fail to agree on the third arbitrator within 30 days from the date of their appointment, then the Chief Justice or any person or institution designated by him can be approached for appointing an arbitrator or the third arbitrator, as the case may be. The procedure 18 prescribed in sub-section (4) also applies to a case involving appointment of a sole arbitrator. Sub-section (6) enumerates the contingencies in which a party may request the Chief Justice or any person or institution designated by him to take necessary measure unless the agreement on the appointment procedure provides other means for securing the appointment. The contingencies contemplated in sub-section (6) are:

(i) if a party fails to act as required under the agreed procedure or,

(ii) the parties or the two appointed arbitrators fail to reach an agreement expected of them under such procedure, or

(iii) a person including an institution fails to perform any function entrusted to him or it under the procedure. Sub-section (8) requires that in appointing an arbitrator, the Chief Justice or any person or institution designated by him shall have due regard to any qualification required of the arbitrator by the agreement of the parties and other considerations as are likely to secure the appointment of an independent and impartial arbitrator. Sections 14 and 15 enumerate the circumstances in which the mandate of an arbitrator shall terminate. Sub-section (1) of Section 14 lays down that the mandate of an arbitrator shall terminate if he becomes de jure or de facto unable to perform his functions or for other reasons fails to act without undue delay and he withdraws from his office or the parties agree to terminate his mandate. Sub-section (2) lays down that if there is any controversy between the parties in relation to any of the grounds referred to in Clause (a) of sub-section (1) and there is no other provision in the agreement between the parties, either party can apply to the Court for termination of the mandate of an arbitrator unless the parties agree otherwise. By sub- section (3) of Section 14 it has been clarified that if an arbitrator withdraws from his office under sub-section (1) of Section 14 or sub- section (3) of Section 13 or a party agrees to the termination of the mandate of an arbitrator, same shall not be construed as an acceptance of the validity of any of the grounds referred to in Section 14 or sub-section (3) of Section 12 which speaks of the grounds of challenge to the appointment of an arbitrator. Section 15 specifies additional circumstances in which the mandate of an arbitrator shall terminate and also provides for substitution of an arbitrator. Sub-section (1) of this section lays down that in addition to the circumstances referred to in Sections 13 and 14, the mandate of an arbitrator shall terminate where he withdraws from office for any reason or pursuant to agreement of the parties. Sub-section (2) of Section 15 postulates appointment of a substitute arbitrator in accordance with the rules that were applicable to the appointment of the original arbitrator.

16. What is significant to be noticed in the aforementioned provisions is that the legislature has repeatedly laid emphasis on the necessity of adherence to the terms of agreement between the parties in the matter of appointment of arbitrators and procedure to be followed for such appointment. Even Section 15(2), which regulates appointment of a substitute arbitrator, requires that such an appointment shall be made according to the rules which were applicable to the appointment of an original arbitrator. The term `rules' used in this sub-section is not confined to




statutory rules or the rules framed by the competent authority in exercise of the power of delegated legislation but also includes the terms of agreement entered into between the parties. In Yashwith Constructions (P) Ltd. v. Simplex Concrete Piles India Ltd. (supra), this Court was called upon to examine the scope of Section 15 of the Act in the backdrop of the fact that after resignation of the arbitrator appointed by the Managing Director of the respondent-Company, another arbitrator was appointed by him in accordance with the arbitration agreement. At that stage, the petitioner filed an application under Section 11(5) read with Section 15(2) of the Act and prayed that the Chief Justice of the High Court may appoint a substitute arbitrator to resolve the disputes between the parties. The learned Chief Justice dismissed the application and held that Section 15(2) refers not only to statutory rules framed for regulating appointment of arbitrators but also to contractual provisions for such appointment. The Division Bench of the High Court which heard the writ petition filed by the petitioners noted that in view of the judgment of the larger Bench in S.B.P. & Company v. Patel Engineering Ltd. and another (supra), a writ petition would not lie against an order made by the Chief Justice under Section 11 of the Act and an appeal could be filed only under Article 136 of the Constitution but proceeded to consider the issue raised by the writ petitioners on merits on the premise that appointments made on or before the judgment of the larger Bench had been saved. The Division Bench then observed that in terms of Section 15(2) of the Act, the Managing Director could, by relying upon the arbitration agreement, appoint another arbitrator because the original arbitrator had resigned. The Division Bench held that Section 15(2) of the Act is applicable not only to the cases of appointments under the statutory rules or rules framed under the Act but also the agreement between the parties for appointment of an arbitrator. While approving the decision of the High Court, this Court held:

"........The term "rules" in Section 15(2) obviously referred to the provision for appointment contained in the arbitration agreement or any rules of any institution under which the disputes were referred to arbitration. There was no failure on the part of the party concerned as per the arbitration agreement, to fulfil his obligation in terms of Section 11 of the Act so as to attract the jurisdiction of the Chief Justice under Section 11(6) of the Act for appointing a substitute arbitrator. Obviously, Section 11(6) of the Act has application only when a party or the person concerned had failed to act in terms of the arbitration agreement. When Section 15(2) says that a substitute arbitrator can be appointed according to the rules that were applicable for the appointment of the arbitrator originally, it is not confined to an appointment under any statutory rule or rule framed under the Act or under the scheme. It only means that the appointment of the substitute arbitrator must be done according to the original agreement or provision applicable to the appointment of the arbitrator at the initial stage. We are not in a position to agree with the contrary view taken by some of the High Courts. Since here, the power of the Managing Director of the respondent is saved by Section 15(2) of the Act and he has exercised that power on the terms of the arbitration agreement, we see no infirmity either in the decision of the learned Chief Justice or in that of the Division Bench....."

17. The need for adherence to the terms of agreement which provide for resolution of differences or disputes by arbitration was highlighted in Datar Switchgears Ltd. v. Tata Finance Ltd. and another (2000) 8 SCC 151 . In that case the appellant had filed an application under Section 11 of the Act for appointment of an arbitrator by contending that despite clear 30 days notice, the first respondent failed to appoint an arbitrator in accordance with the terms of lease agreement. The Chief Justice of the High Court rejected the appellant's prayer by observing that respondent No.1 had appointed an arbitrator before filing of the application. In the appeal, it was argued that in view of the respondent's failure to appoint an arbitrator within 30 days, the Chief Justice of the High Court was bound to exercise power under Section 11(6) of the Act and appoint an arbitrator. This Court referred to the arbitration clause contained in the agreement entered into between the




parties, some of the judicial precedents on the subject and held that failure of respondent No.1 to appoint an arbitrator within 30 days of the receipt of the notice did not have the effect of forfeiting his right to do so and that the said right could be exercised till the filing of an application under Section 11 by the other side. The Court then proceeded to observe:

"When parties have entered into a contract and settled on a procedure, due importance has to be given to such procedure. Even though rigor of the doctrine of "freedom of contract" has been whittled down by various labour and social welfare legislation, still the court has to respect the terms of the contract entered into by parties and endeavour to give importance and effect to it. When the party has not disputed the arbitration clause, normally he is bound by it and obliged to comply with the procedure laid down under the said clause."

(emphasis supplied)

18. In Northern Railway Administration, Ministry of Railway, New Delhi v. Patel Engineering Company Ltd. (supra), a three-Judge Bench considered apparently divergent opinions expressed in Ace Pipeline Contracts (P) Ltd. v. Bharat Petroleum Corpn. Ltd. (supra) and Union of India v. Bharat Battery Mfg. Co. (P) Ltd. (2007) 7 SCC 684, referred to Section 11 of the Act and observed:

"Sub-sections (3) to (5) refer to cases where there is no agreed procedure. Sub-section (2) provides that subject to sub-section (6) the parties are free to agree on a procedure for appointing the arbitrator or arbitrators. Sub-section (6) sets out the contingencies when party may request the Chief Justice or any person or institution designated by him to take necessary measures unless the agreement on the appointment procedure provides other means for securing the appointment. The contingencies contemplated in sub-section (6) statutorily are (i) a party fails to act as required under agreed procedure or (ii) the parties or the two appointed arbitrators fail to reach an agreement expected of them under that procedure or (iii) a person including an institution fails to perform any function entrusted to him or it under the procedure. In other words, the third contingency does not relate to the parties to the agreement or the appointed arbitrators. The crucial expression in sub-section (6) is "a party may request the Chief Justice or any person or institution designated by him to take the necessary measures"

(underlined for emphasis).

This expression has to read alongwith requirement in sub-section (8) that the Chief Justice or the person or an institution designated by him in appointing an arbitrator shall have "due regard" to the two cumulative conditions relating to qualifications and other considerations as are likely to secure the appointment of an independent and impartial arbitrator. A bare reading of the scheme of Section 11 shows that the emphasis is on the terms of the agreement being adhered to and/or given effect as closely as possible. In other words, the Court may ask to do what has not been done. The court must first ensure that the remedies provided for are exhausted. It is true as contended by Mr. Desai, that it is not mandatory for the Chief Justice or any person or institution designated by him to appoint the named arbitrator or arbitrators. But at the same time, due regard has to be given to the qualifications required by the agreement and other considerations."

(emphasis supplied)

19. The aforementioned judgment was followed in Union of India v. M/s. Singh Builders Syndicate (supra). In that case it was found that the Arbitral Tribunal constituted in accordance with Clause 64 of the agreement, could not function due to frequent transfer of the incumbent of




the post of General Manager who was appointed as one of the members of the Tribunal and, therefore, on a petition filed by the respondent, the High Court appointed a retired Judge as an arbitrator. This Court noted that the dispute was pending for nearly 10 years from the date when the demand for arbitration was first made and declined to interfere with the order of the High Court. Paragraphs 14 and 15 of the judgment which have bearing on this case are extracted below:-

14. It was further held in Northern Railway Administration, Ministry of Railway, New Delhi v. Patel Engineering Company Ltd. that the Chief Justice or his designate should first ensure that the remedies provided under the arbitration agreement are exhausted, but at the same time also ensure that the twin requirements of sub-section (8) of Section 11 of the Act are kept in view. This would mean that invariably the court should first appoint the arbitrators in the manner provided for in the arbitration agreement. But where the independence and impartiality of the arbitrator(s) appointed/nominated in terms of the arbitration agreement is in doubt, or where the Arbitral Tribunal appointed in the manner provided in the arbitration agreement has not functioned and it becomes necessary to make fresh appointment, the Chief Justice or his designate is not powerless to make appropriate alternative arrangements to give effect to the provision for arbitration.

15. The object of the alternative dispute resolution process of arbitration is to have expeditious and effective disposal of the disputes through a private forum of the parties' choice. If the Arbitral Tribunal consists of serving officers of one of the parties to the dispute, as members in terms of the arbitration agreement, and such tribunal is made non-functional on account of the action or inaction or delay of such party, either by frequent transfers of such members of the Arbitral Tribunal or by failing to take steps expeditiously to replace the arbitrators in terms of the arbitration agreement, the Chief Justice or his designate, required to exercise power under Section 11 of the Act, can step in and pass appropriate orders.

20. We may now advert to the scope of Clause 19 of piece work agreement, which provides for appointment of two arbitrators, one by each party, with liberty to the arbitrators to appoint an Umpire, in case of difference or their failure to reach an agreement within one month of their appointment. The award made by two arbitrators or Umpire, as the case may be, is treated as final, conclusive and binding on the parties. This clause also specifies the consequence of failure of either party to the difference or dispute to appoint an arbitrator within 30 calendar days counted from the date of notice in writing given by the other side or refusal of the arbitrator appointed by either party to accept such appointment or act upon the same. In that event, the arbitrator appointed by the other party becomes entitled to proceed with the reference as the Sole Arbitrator and make an award. There is nothing in Clause 19 from which it can be inferred that in the event of refusal of an arbitrator to accept the appointment or arbitrate in the matter, the party appointing such arbitrator has an implicit right to appoint a substitute arbitrator. Thus, in terms of the agreement entered into between the parties, respondent No.1 could not appoint Shri S.L. Jain as a substitute arbitrator simply because Shri S.N. Huddar declined to accept the appointment as an arbitrator. The only consequence of Shri S.N. Huddar's refusal to act as an arbitrator on behalf of respondent No.1 was that respondent No.2 who was appointed as an arbitrator by the appellants became the Sole Arbitrator for deciding the disputes or differences between the parties.

21. The learned designated Judge appointed the third arbitrator because he was of the view that in terms of Section 15(2), a substitute arbitrator could be appointed where the mandate of an already appointed arbitrator terminates. In taking that view, the learned designated Judge failed to notice that Section 15(1) provides for termination of the mandate of arbitrator where he withdraws from




office for any reason or by or pursuant to agreement of the parties and not where the arbitrator appointed by either party declines to accept the appointment or refuses to act as such and that the term `rules' appearing in Section 15(2) takes within its fold not only the statutory rules, but also the terms of agreement entered into between the parties.

22. The words `refuse' and `withdraw' have not been defined in the Act. Therefore, we may usefully refer to dictionary meanings of these words. As per P. Ramanatha Aiyar's Advanced Law Lexicon (Third Edition 2005), the word `refuse' means to decline positively; to express or show a determination not to do something. As per Century Dictionary, the word `refuse' means to deny, as a request, demand or invitation; to decline to accept; to reject, as to refuse an offer. As per New Oxford Illustrated Dictionary, Volume II, p.1421, the word `refuse' means - say or convey by action that one will not accept, submit to, give, grant, gratify consent. The dictionary meanings of the word `withdraw' are as follows:

1. The Law Lexicon (Third Edition, 2005) - to take back or away something that has been given, allowed, possessed, experienced or enjoyed; to draw away.

2. Black's Law Dictionary (Eighth Edition, p.1632) - the act of taking back or away, removal; the act of retreating from a place, position or situation.

3. New Oxford Illustrated Dictionary (Volume II, p.1894) - pull aside or back, take away, remove, retract; retire from presence or place, go aside or apart.

23. The above extracted meanings of two words bring out sharp distinction between them. While the word `refuse' denotes a situation before acceptance of an invitation, offer, office, position, privilege and the like, the word `withdraw' means to retract, retire or retreat from a place, position or situation after acceptance thereof. Therefore, Section 15(2) of the Act does not per se apply to a case where an arbitrator appointed by a party to the agreement declines to accept the appointment or refuses to arbitrate in the matter. Of course in a given case, refusal to act on the arbitrator's part can be inferred after he has entered upon arbitration by giving consent to the nomination made by either party to the agreement.

24. Insofar as this case is concerned, we find that the arbitrator appointed by respondent No.1, namely, Shri S.N. Huddar declined to accept the appointment/arbitrate in the matter on the ground that in his capacity as Superintending Engineer and Chief Engineer, he was associated with Koyna Hydel Project implying thereby that he may not be able to objectively examine the claims of the parties or the other party may question his impartiality. To put it differently, Shri S.N. Huddar did not enter upon the arbitration. Therefore, there was no question of his withdrawing from the office of arbitrator so as to enable respondent No.1 to appoint a substitute arbitrator. In any case, in the absence of a clear stipulation to that effect in the agreements, respondent No.1 could not have appointed a substitute arbitrator and the learned designated Judge gravely erred in appointing the third arbitrator by presuming that the appointment of Shri S.L. Jain was in accordance with law.

25. The decision in Yashwith Constructions (P) Ltd. v. Simplex Concrete Piles India Ltd. (supra) on which reliance has been placed by Shri Dave does not help the cause of respondent No.1. A careful reading of that judgment shows that immediately after the arbitrator appointed by the Managing Director of the respondent-Company resigned, another arbitrator was appointed in accordance with arbitration agreement. The permissibility of appointment of another arbitrator by the Managing Director of the respondent-Company is clearly evinced from the following extracts of paragraphs 2 and 3 of the judgment:
"2. On a dispute having arisen, the Managing Director of the respondent Company appointed an arbitrator in terms of the arbitration clause. The arbitrator resigned. Thereupon, the Managing Director of the respondent Company, in view of the mandate in the arbitration agreement promptly appointed another arbitrator....... 3.........The Division Bench held that the position obtaining under Section 8(1) of the Arbitration Act of 1940 differed from that available under the present Act especially in the context of Section 15 thereof and that in terms of Section 15(2) of the Act, the Managing Director could, on the basis of the arbitration agreement, appoint another arbitrator when the originally appointed arbitrator resigned, thus attracting Section 15(1)(a) of the Act......"

Although, the language of paragraph 4 of the judgment gives an impression that the Court decided the matter by presuming that the agreement between the parties did not contain a provision for appointment of a substitute arbitrator if the original appointment terminates or if the original arbitrator withdraws from the arbitration and this omission is supplied by Section 15(2) of the Act, if that paragraph is read in conjunction with paragraphs 2 and 3 it becomes clear that the arbitration agreement did provide for appointment of another arbitrator in the event originally appointed arbitrator was to resign and there was no plausible reason for the Court to presume that there is an omission in the agreement on the issue of appointment of a substitute arbitrator. In any case, the judgment cannot be read as laying down a proposition of law that in the absence of a specific provision in the arbitration clause, either party to the agreement can appoint a substitute arbitrator in the event of the originally appointed arbitrator refusing to act.

26. At the cost of repetition, we consider it necessary to observe that the agreements entered into between the appellant and respondent No.1 do not contain a provision for appointment of a substitute arbitrator in case arbitrator appointed by either party was to decline to accept appointment or refuse to arbitrate in the matter. Therefore, respondent No.1 cannot draw support from the ratio of the judgment in Yashwith Constructions (P) Ltd. v. Simplex Concrete Piles India Ltd. (supra).

27. In the result the appeals are allowed and the orders of the learned designated Judge of the High Court appointing Shri Justice M.N. Chandurkar as the third arbitrator are set aside. Respondent No.2 shall now proceed with the matter as the Sole Arbitrator and pass appropriate award in accordance with law within a period of three months from the date of receipt/production of copy of this order.


DINESH KUMAR SRIVASTAV AND ORS VERSUS SWATI SINHA AND ANR

Hindu Marriage Act, 1955, Section 13-B- Divorce – During the pendency of the present petition, the parties have decided to put an end to their matrimonial relationship and filed the present application for seeking mutual divorce under under Section 13-B of the Act. The parties are granted a decree of divorce by mutual consent. In case of non-compliance of any condition incorporated in the application, the parties would be at liberty to approach the Allahabad High Court.



SUPREME COURT OF INDIA

(DALVEER BHANDARI & P. SATHASIVAM, JJ.)

DINESH KUMAR SRIVASTAV AND ORS VERSUS SWATI SINHA AND ANR


Criminal Appeal No.1922 of 2009 (Arising out of S.L.P. (Crl.) No.4317 of 2007)-Decided on 19-10-2009.



ORDER

1. Leave granted.

2. During the pendency of this matter, a joint application has been filed by Dinesh Kumar Srivastav and Swati Sinha under Section 13-B of the Hindu Marriage Act, 1956, [for short, `the Act']. It is stated in the said application that, during the pendency of the present petition, the parties have decided to put an end to their matrimonial relationship and filed the present application for seeking mutual divorce under under Section 13-B of the Act. In the application, it is mentioned that both the parties shall withdraw the civil and criminal proceedings initiated by them against each other in various Courts. Let it be done within four weeks from today.

2. The appellant-Dinesh Kumar Srivastav has given a bank draft of Rs.1.25 lakhs to Swati Sinha towards her maintenance and Rupees one lakh has been deposited in the name of his daughter-Shivani Sinha under the guardianship of her mother Swati Sinha.

3. The appellant-Dinesh Kumar Srivastav has further agreed to pay Rupees two thousand per month to Swati Sinha towards monthly educational expenses of his daughter Shivani Sinha. He has also undertaken to pay the same till Shivani attains the age of 18 years. The amount of Rupees two thousand shall be paid to Swati Sinha by an account payee cheque/draft every month by 15th day of each calendar month. It may be stated that the amount of Rupees two thousand would be paid from the month of November, 2009 onwards.

4. The appellant-Dinesh Kumar Srivastav would be entitled to spend two hours with his daughter on second and fourth Saturdays/Sundays of every month at the place wherever she stays with Swati Sinha. Swati Sinha is directed to cooperate in that respect.

5. On consideration of the totality of the facts and circumstances of this case, the parties are granted a decree of divorce by mutual consent. In case of non-compliance of any condition incorporated in the application, the parties would be at liberty to approach the Allahabad High Court.

6. The civil appeal is, accordingly, disposed of on the above terms.


Wednesday, October 21, 2009

RAM BABU AGARWAL VERSUS JAY KISHAN DAS

Madhya Pradesh Accommodation Control Act, 1961 — Section 13(6) — suit for eviction — on grounds:- (i) default in payment of rent; (ii) bonafide need of premises to do footwear business by the appellant's son — entire rent been deposited by the tenant in compliance with the order of the High Court — Section 13(6) apply to the statutory appeal and not to the constitutional remedy — held that many people start new businesses even if they do not have experience in the new business but that does not mean that appellant's claim for starting the new business must be rejected on the ground that it is a false claim — remanded the matter back to the trial Court to decide the issue of bonafide afresh — impugned order of High Court set aside — appeal allowed with no cost.

 SUPREME COURT OF INDIA

(HON'BLE MR. JUSTICE MARKANDEY KATJU & HON'BLE MR. JUSTICE ASOK KUMAR

GANGULY, JJ.)


RAM BABU AGARWAL VERSUS JAY KISHAN DAS
 

Civil Appeal No(s). 1388 of 2003-Decided on 07-10-2009.

Eviction – Bonafide Need – New Business

Advocates(s): For Appellant(s): Mr. Sushil Kumar Jain, Adv., Mr. Niraj Sharma, Adv. Mr. Vikrant Singh Bais, Adv. Ms. Eshita Barua, Adv.

For Respondent(s) Mr. Anup G.Choudhary, Sr. Adv. Mr. Prashant Kr. Roy, Adv. Mr. Ashwani Kumar, Adv. UPON hearing counsel the Court made the following

ORDER

Heard learned counsel for the parties. This Appeal has been filed against the impugned judgment of the High Court of Madhya Pradesh dated 23.8.2002 passed in First appeal No. 224 of 1997. The appellant is the landlord of the premises in question and the respondent is a tenant therein. The appellant filed a suit for eviction against the tenant on two grounds (i) default in payment of rent; (ii) bonafide need. As regards the first point, the High Court has recorded a finding of fact that the entire rent has been deposited by the tenant in compliance with the order of the High Court passed in a revision petition and hence we cannot interfere with the finding of the High Court on that point. Shri S.K.Jain, learned counsel for the appellant submitted that even if the tenant has paid the rent up to the proceedings in the High Court, if he has committed default in payment of rent after the judgment of the High Court and during the pendency of the special leave -2- petition/appeal under Article 136 of the Constitution of India before this Court, the provisions of Section 13(6) of the Madhya Pradesh Accommodation Control Act, 1961 (for short 'the Act') will apply and the defence of the tenant will have to be struck off. We do not agree. In our opinion, the provisions of section 13(6) of the Act will apply only to the statutory appeals under the Act and not to the constitutional remedy under Article 136 of the Constitution. It is well settled that a statutory provision cannot control a constitutional provision. An appeal is a creature of the statute and the conditions mentioned in Section 13(6) of the Act will apply to the statutory appeal and not to the constitutional remedy. That is because a constitutional provision is on a higher pedestal as compared to a statutory provision. A statute cannot control the constitutional provisions. Hence, we reject the first submission of Shri S.K.Jain. However, as regards the question of bonafide need, we find that the main ground for rejecting the landlord's petition for eviction was that in the petition the landlord had alleged that he required the premises for his son Giriraj who wanted to do footwear business in the premises in question. The High Court has held that since Giriraj has no experience in the footwear business and was only helping his father in the cloth business, hence there was no bonafide need. We are of the opinion that a person can start a new business even if he has no experience in the new business. That does not mean that his claim for starting the new business must be rejected on the ground that it is a false claim. Many people start new businesses even if they do not have experience in the new business, and sometimes they are successful in the new business also. Hence, we are of the opinion that the High Court should have gone deeper into the question of bona fide need and not rejected it only on the ground that Giriraj has no experience in foot wear business. For the reasons given above, we set aside the impugned judgments of the High Court and the trial Court on the question of bona fide need and remand the matter to the trial Court only to decide the issue of bona fide need afresh. Parties may lead fresh evidence on their pleadings and the trial Court shall decide the matter expeditiously thereafter. The Appeal is allowed on the question of bona fide need only to the extent indicated above.

No costs
.



Friday, October 16, 2009

ARULVELU & ANOTHER VERSUS STATE REPRESENTED BY THE PUBLIC PROSECUTOR & ANOTHER

Indian Penal Code, 1860 — Section 304-B & 498-A — dowry death and harassment of women by her husband and relatives — Fact of consistent demands not established from clear evidence of the prosecution — no credible evidence to suggest that soon before the death, the deceased has been subjected to cruelty or harassment by the accused in connection with any demand of dowry which led to a serious act of committing suicide — in an appeal against acquittal, unless the judgment of the trial court is perverse, the Appellate Court would not be justified in substituting its own view and reverse the judgment of acquittal without substantial and compelling reasons — impugned judgement of the High Court set aside and orders of trial Court restored — appeal allowed.


SUPREME COURT OF INDIA

(DALVEER BHANDARI & DR. B.S. CHAUHAN, JJ.)

ARULVELU & ANOTHER VERSUS STATE REPRESENTED BY THE PUBLIC PROSECUTOR & ANOTHER
Criminal Appeal Nos. 1233-1234 of 2002-Decided 7-10-2009.

JUDGMENT

Dalveer Bhandari, J.-These appeals are directed against the judgment of the High Court of Madras dated 12.3.2002 in Criminal Appeal No. 315 of 1992 and Criminal R.C. No. 691 of 1991 respectively.

2. In the instant case, the High Court has reversed the judgment of acquittal passed by the II Additional Assistant Sessions Judge, Periyar District in Sessions Case No. 45 of 1999 and convicted the accused persons. 

3. Brief facts which are necessary to dispose of the matter are recapitulated as under: 

This appeal is filed by Arulvelu, A-1 and Krishnasamy, A-2 (father of A-1). Appellant Arulvelu has been convicted under section 304-B of the Indian Penal Code (for short `IPC') and sentenced to seven years rigorous imprisonment and he has been further convicted under section 498-A IPC and sentenced to rigorous imprisonment for a period of two years and to pay a fine of Rs.1,000/-, in default to suffer three months rigorous imprisonment. Appellant accused no.2 has been imposed sentence of fine of Rs.1,000/-under section 498-A of IPC, in default to suffer simple imprisonment for a period of three months.

4. Before the marriage of Arulvelu with Mangayarkarasi (since deceased), an agreement was entered into to the effect that towards the consideration of the marriage, deceased's father P.W.1 would give gold ornaments of the weight of 50 sovereigns along with other articles and a car to Arulvelu. 

5. The father of the deceased could give ornaments of the weight of only 30 sovereigns of gold and also could not give the car as undertaken. Instead of giving the remaining ornaments of 20 sovereigns and a car, P.W.1 in all gave only Rs.5,000/- in small installments. This was the main cause of annoyance of Arulvelu and his family members with the deceased. It is the case of the prosecution that accused nos. 1 to 3 had been torturing the deceased Mangayarkarasi by demanding a car and money. 
6. A baby boy was born to Arulvelu and the deceased Mangayarkarasi. Arulvelu told his wife that he would take back her along with the newly born child only if ornaments of the weight of 5 sovereigns and a cash amount of Rs.5,000/- were given to him. The father of the deceased had given ornaments of the weight of 4 sovereigns and a cash of Rs.5,000/- to the first accused. The first accused had taken back the deceased and the child only after receiving the aforementioned articles from P.W.1. 

7. The first accused had demanded the balance ornament of the weight of one sovereign when the second child was born. The father of the deceased gave ornament of the weight of one sovereign. 

8. The first accused had sent the deceased Mangayarkarasi many times to her father for getting money for doing business. According to the prosecution, since the car was not given to the first accused, he had beaten and tortured the deceased asking her to get the car from P.W.1. Mangayarkarasi ultimately became disgusted with her life and at 11.30 a.m. on 15.3.1989, she committed suicide by hanging herself. 

9. The prosecution, in order to prove its case, had examined 20 witnesses. K. Ramalingam P.W.1 is the father of the deceased. D. Latha P.W.4 is the sister of the deceased. S.T.P. Muthusamy Mudaliar P.W.5 is the neighbour. Thirumathi N. Yasodha P.W.2 is the tenant of P.W.1and P.W.3 A. Periasamy is the person who had arranged the marriage of the first accused and the deceased. V.P. Subramaniam P.W.6 is a close relative of the deceased. N.Manickam P.W.8 is a member of the Panchayat. S.A. Periasamy P.W.9 is another Sambandhi of P.W.1 who later on turned hostile. 

10. The fact that the deceased had committed suicide by hanging herself is undisputed. The question which arises for our adjudication is whether the appellant is guilty for compelling the deceased to commit suicide. According to the prosecution she was forced to commit suicide because of consistent demands of dowry made by the first accused. According to P.W.1 the father of the deceased, his daughter committed suicide because he could not give gold and a car as agreed before her marriage. The accused persons started torturing and harassing the deceased which ultimately led to suicide. 

11. The trial court in its lengthy and comprehensive judgment has dealt with the prosecution evidence and also all the 33 material exhibits. According to the learned trial Judge, the evidence of P.W.1 that he agreed to give balance ornaments was not corroborated by P.W.3. According to the trial court, P.W.1 had admitted that for the first time, he told the court that accused no. 2 demanded 40 sovereigns and the same was not stated either before the police officers or during Revenue Divisional Officer's enquiry. According to the trial Judge, P.Ws. 15, 17 and 20 would depose that P.W.1 has not told about the demand of ornaments during his cross-examination. The trial court further held that P.W.1 had admitted that he did not tell about the demand of 40 sovereigns of gold by accused no. 2 during the course of investigation, it is his case that an agreement was reached at 35 sovereigns. This has been corroborated by P.W.3 also. P.W.15, the Revenue Division Officer who conducted the enquiry and who also held the inquest came to the conclusion that the death was due to cruelty meted out to the deceased by way of demand of dowry. He has stated in the cross examination that during enquiry P.W.1 did not tell him that first accused demanded 5 sovereigns as a condition to take his wife and the child after delivery. P.W.15 further stated that during enquiry P.W.1 did not tell him that the first accused demanded Rs.10,000/- for his business. During cross-examination on the side of the accused, P.W.15 had admitted as follows: 

"P.W.1 stated that in his evidence that A2 demanded 50 sovereign of gold before marriage, but he accepted to put only 30 sovereign of gold and remaining 20 sovereign
 



will be given later and if the business goes well then he will get a car. But he never stated in his evidence that A2 demanded 40 sovereign of gold and P.W.1 refused and then accepted to give later."

12. The trial judge, while discussing the evidence of P.W.15, found that there was no demand of bridal gifts before the marriage. The trial judge disbelieved the version of P.W.3 holding that he is not related to P.W.1 and he pleaded ignorance about the date and month of meeting of P.W.1 and accused no. 2. The trial judge also disbelieved the testimony of P.W.1 regarding giving of 4 sovereigns and Rs.5,000/- to the first accused after the birth of the first child and another sovereign of jewel at the time of birth of the second child for the reason that those facts were not spoken to during investigation. This part of the prosecution case is disbelieved. The trial judge has clearly held that P.W.1 deposed for the first time in the court with regard to demand of a car. He did not mention this fact in the first information report. 

13. Ex. P.8 is the suicide note of the deceased which reads as under: 

"Nobody is responsible for my death. Children should be handed over to mother's house."

In the suicidal note, the deceased had not implicated any accused. This factor has also weighed heavily with the trial court in acquitting all the accused. The argument on behalf of the accused was that the accused no. 1 had suspected the character of his mother-in-law and other members of his in- law's family, so he did not want the deceased to visit her parents' house and to resolve the dispute Panchayat was held and, as per the version of P.W. 1, according to the decision of Panchayat, P.W. 1 should not go to the house of the accused and the deceased and accused nos . 1 to 3 also should not go to the house of P.W.1 . As per the version of the accused, the decision of the Panchayat not permitting the deceased to go to her parents perhaps led to suicide. The trial court after carefully examining the entire evidence acquitted the accused.

14. According to the High Court, if she (the deceased) had no problem in her marital house and she was living peacefully with her husband and in-laws, what was the necessity for her to commit suicide? Why should she write in her suicide note to leave her children in her mother's house? According to the High Court, unless an intolerable harassment was meted out to her, there was absolutely no necessity for her to write like this that the children be handed over to her mother's house. Therefore, the High Court held that, in all probabilities, there was demand of dowry and the deceased was harassed by the first accused and therefore, she committed suicide. 

15. The High Court set aside the judgment of the trial court on the count that the trial court gave undue emphasis on the minor inconsistencies and contradictions. The High Court discarded the version of the trial court regarding P.W.1's deposition for the first time in court regarding demand of car which he did not mention in the first information report (FIR). 

16. The High Court observed that the FIR cannot be an encyclopedia to contain all the details of history of the case. This approach of the High Court does not seem to be correct. The FIR should at least mention a broad story of the prosecution and not mentioning of material and vital facts may affect the credibility of the FIR. 

17. The trial court doubted the veracity of the statement of P.W.1 because it did not find any corroboration of the statement of P.W.1 with the statement of P.W.3 regarding agreeing to give the balance gold sovereigns. The High Court without any basis discarded the judgment of the trial court.

18. The trial judge observed that the testimony of P.W.1 is not credible because he for the first time in the court had stated that accused no. 2 had demanded 40 sovereigns. This was not stated either before the police officer or during Revenue Divisional Officers' enquiry. 

19. The trial court disbelieved the version of P.W.1 regarding giving 4 sovereigns and Rs.5,000/-to the first accused after the birth of the first child and another sovereign of jewel at the time of birth of the second child for the reason that those facts were not spoken to during the investigation. The High Court held this part of the prosecution case unbelievable, but the fact remains that the demand of dowry was proved beyond doubt through the evidence of P.Ws. 1 and 

3. This approach of the High Court is not correct. 

20. The High Court ought to have considered the entire evidence in a proper perspective. Unless comprehensive view of the entire evidence is taken in the proper perspective, a correct conclusion may not be possible. In this case, there has been acquittal by the trial court and, while reversing the order of acquittal, the High Court ought to have carefully considered the following circumstances: 

(1) In the suicide note Ex. P-8, the deceased has not implicated any of the accused. This is indeed a very significant and vital factor which ought to have received proper attention by the High Court. 

(2) There is no credible evidence to suggest that soon before the death, the deceased has been subjected to cruelty or harassment by the accused in connection with any demand of dowry which led to a serious act of committing suicide. 

(3) The High Court failed to consider that the marriage took place in the year 1983 and the deceased committed suicide in the year 1989 i.e. after more than six years of the marriage. There are two small children out of the wedlock. It is quite improbable that ordinarily there would be consistent demands of dowry after six years. The fact of consistent demands is not established from clear evidence of the prosecution. 

(4) The distance between the matrimonial home and the parental home of the deceased is merely one kilometer. There are many houses around the house of the accused. It is submitted that there was neither a whisper nor any complaint was filed by P.W.1 before the deceased committed suicide. 

(5) It appears from the statement under section 313 IPC that A-1 wanted his wife (deceased) to keep some distance from her parental home. It transpired in the meeting of the Panchayat that to settle the dispute between the husband and wife and to reduce the affinity of the wife (deceased) towards her parental home (One kilometer away from the parental home), the Panchayat took the decision that both the families should not visit each other. The impact of the decision of Panchayat on the deceased was not properly appreciated by the High Court. 

(6) S.A. Periyasamy P.W.9 has not supported the case of the prosecution. He has stated that "we told Ramalingam that he and his wife should not go to Arulvelu’s house often". He has also admitted that A-1 and Magaiyarkarsi (deceased) were living happily. 

(7) Ramalingam P.W.1 has stated that he consoled and advised his daughter to be bold as they would not come to see her as per the dictum of the Panchayat and wisely handle the situation at her matrimonial house. In fact the suggestion of defence is that the Panchayat was convened as there was a serious apprehension about the character of the mother of the deceased and her family. That is why in the Panchayat no discussion about dowry demand was whispered. Moreover, if the first appellant did not like his deceased wife, he would not be keen on keeping her with him.

(8) It appears that the Panchayat's decision caused serious depression to the deceased. It is submitted that the deceased's strong affinity towards her parents and her inability to cope up with the situation coupled with her sickness, she was driven to such a situation to commit suicide. 

(9) R. Murugesan P.W.15, the RDO who prepared the inquest report has also stated about the panchayat's decision and has opined that "the reason for her death may be the control exerted on her that she should not go to her mother's house". 

(10) The trial court has observed that when the accused were questioned under section 313 Cr.P.C., they filed a written statement jointly. In that written statement it has been explained that – 

"Due to mental agony, incurable stomach-ache, pain over the body and the control by the first accused that she should not go to the house of her parents, Mangayarkarasi had committed suicide". Further that "Arulvelu, without marrying for the second time for several years looked after the children with lot of love and affection so that the children may not feel the absence of their mother. The family of accused is a joint family. In that family, accused nos. 1 to 3 and Vijayakumar, another son of accused nos. 2 and 3 and his wife Padma are living jointly."

(11) The trial court noticed serious contradictions and inconsistencies in the evidence of P.W.1 and those became relevant particularly when the High Court was dealing with the order of acquittal. 

(12) There are material contradictions in the statements of P.W.1 and P.W.3. P.W.1 says after the birth of first child there was demand. Whereas P.W.3 says after 6-7 months of the marriage there was demand. Further P.W.1 says that 20 days before the occurrence A-2 and A-3 said that customary gifts were not good. Whereas P.W.3 says that after 6-7 months of 1st incident deceased was told that the articles were not good. P.W.1 says 30 sovereigns. However, P.W.3 says 35 sovereigns. P.W.1 has stated that he said to A-2 that he could give 20 sovereign later on. However, P.W.3 does not corroborate the same. Though P.W.3 has stated that A-2 demanded car during the marriage negotiation, however, P.W.3 has not corroborated the evidence of P.W.1 with regard to the demand of car. It is submitted that none of the investigating officers have supported P.W.1 with regard to the demand of jewels, car, cash and/or with regard to harassment to the deceased due to non fulfillment of the above said items. 

(13) A. Periyasamy P.W.3 has not been examined by the DSP Sivanandam, RDO, Karuppusamy and others. Only CB CID Velu examined him. CB CID, Velu has stated that P.W.3 told him that the (a) P.W.1 is not his relative (b) not a family friend (c) accused is also not related (d) that he did not go for condolence when Mangai died (e) he does not know about Seer Varisai (f) he does not know about the dates on which he arranged the talks. However during his deposition he has admitted that he knows Palaniappan, the brother of Rukmani (P.W.1's wife) and he is his relative. P.W.20 has admitted that P.W.3 has said that Ramlingam (P.W.1) is his family friend. For the above said reasons the evidence was of P.W.3 was not relied upon the trial court. It is submitted that the High Court has not considered these aspects.

(14) D. Latha P.W.4 stated that she was present during the talks when the demand during the marriage negotiation took place. However, P.W.3 says during talks except P.W.1 and A-2 no body was present. Further none of the witnesses including P.W.1 has said that P.W.4 was present during the talks. K. Sivanandhan, Deputy Superintendent of Police P.W.17 has stated that P.W.4 has not stated that failure to buy a car became a problem. She has not stated about the demand of 50 sovereigns and a car. Therefore the trial court has disbelieved the presence of P.W.4 during the talks. D. Latha P.W.4 has not given in her evidence that she had known personally that little by little 20 sovereign were given. The trial court has held that P.W.4 does not speak anything about the timings of the torture like four weeks, 20 days or 8 days before the death. 

(15) S.T.P. Muthusamy Mudaliar P.W.5's testimony does not inspire confidence. He says that during the verbal argument between A-1 and Rukmani Amma, A-1 asked about car. However, Yasodha P.W.2 did not say the same. Further, Rukmani Amma was not examined. It is submitted that the trial court has discussed the contradictions between P.W.2, P.W.1 and P.W.5 and about utterance with regard to car in the quarrel and therefore the trial court has not relied on P.W.5. It is submitted that apart from Rukminiammal, Shaktivel (P.W.1's son) and Planniappan was also not examined by the prosecution. 

(16) S.A. Periyasamy P.W.9 (Sambandhi of P.W.1) has not supported the case of prosecution. He says that he advised Ramlingam that they should not go to A-1's house often. During his cross-examination he has stated that "I understood that Arulvelu and Mangaiyarkarasi were living a happy matrimonial life. There is a Car in my son Sivakumar's name TNC-4128. Its RC was in the name of Ramalingam S/o Palaniappa Mudhaliar." 

(17) The Assistant Judicial Magistrate PW 11 has stated that crime number of Exhibit A-1 has been manipulated. Further, P.W.13 has stated that "Ramalingam has given only one complaint on that day. Exhibit A13 is the first original copy. Exhibit A18 is the original of another set of copies taken. The person who has written Exhibit 13 has not written Exhibit A18". 

The trial court has also discussed the discrepancy with regard to Exh. A-13 and Exh.A-18.

(18) R. Murugesan P.W.15, RDO who prepared the inquest report has admitted that Yashoda (P.W.2) was examined on 30.03.89. He also stated that nearly 1000 houses would be there. It was crowded area with many houses. However, no neighbour was examined as a witness. Further, P.W.17 has admitted that A -1 said to him that he (A-1) brought the doctor. However, P.W.15 did not believe the same. It is submitted that P.W.15 has not given any cogent reason for disbelieving the same. It is submitted that the conduct of P.W.15 (the RDO) was adversely commented by the trial court.

(19) R.Murugesan P.W.15 has stated that Rukmaniammal said that on 18.3.89 Mangayarkarsi came to the house as she was ill. She asked as to why did she (Rukmaniammal) made controversy in a house where the death had taken place. She has also stated that on 21.3.89 she had sent medicine and tablets to Mangayarkarasi's husband's house through a car. It is submitted that R. Murugesan P.W.15 has admitted that Ramlingam (P.W.1) has not stated that A -1 had told him that he was going to get into another marriage. Further, he (P.W.1) did not say about demand of 5 sovereigns, Rs.10,000/- and that dowry was not enough. He (P.W.1) has also not stated before P.W.15 that Mangayarkarsi came to his house 8 days before and told that she could live only if he buys a car. Further, P.W.1 had also not stated before him that on Tuesday their daughter's parents in law asked them to buy a car. P.W.15 has further admitted that Yashoda (P.W.2) had stated that A-1 came to Rukmanniammal and told that `because of you, A am very ashamed'. P.W.15 has also stated that P.W.1 had not told him that before marriage there was any discussion about dowry on presence of some persons. Further that none of the witnesses has stated that they discussed about jewels and car before the marriage.

(20) The Panchayat's decision coupled with the condition of illness could have driven the deceased to commit suicide. This possibility cannot be ruled out. P.W.15 has also stated that on 22.3.89 a panchayat was convened to decide on the issue of dispute between both the families. In that Panchayat it has been decided that they should not visit each others house and Mangaiyarkarasi has to be advised accordingly. 

(21) The High Court has made erroneous observation that: "It is not the panchayat decision that the deceased should not visit her parents. The only thing is P.W.1 should not go to the house of the accused". As per the case of prosecution and as per the evidence it is crystal clear that the Panchayat's decision was that `both the familier should not visit each other'. 

(22) The High Court failed to appreciate that the prosecution has failed to prove that with all certainty, the dowry demand was the only cause for the deceased to commit suicide. The High Court has simply presumed with the following words: 

"The immediate temptation for her to commit suicide appears to be the demand of a car and subsequent quarrel of the first accused with the mother of the deceased. She has died in her in-law's house. Why should she commit suicide if she was happily living with the first accused?"

21. These are some of the material and vital aspects which clearly demonstrate that the trial court has carefully analyzed the entire evidence on record and the view taken by the trial court is certainly a possible or plausible view. 

22. In our considered opinion, the approach of the High Court in the impugned judgment is not in consonance with the settled principles of criminal jurisprudence. The High Court while reversing the judgment of the trial court observed that "in all probabilities, I am inclined to hold that there was demand of dowry and the deceased was harassed by the first accused and therefore, she committed suicide." In criminal cases the conviction can be sustained only when there is clear evidence beyond reasonable doubt. The accused cannot be convicted on the ground that in all probabilities the accused may have committed the crime. The approach of the High Court is wholly fallacious and unsustainable in law. 

23. The real question which falls for our consideration is whether the view which has been taken by the trial court was a possible or a plausible view. 
 24. We have carefully perused the judgment of the trial court and the impugned judgment of the High Court. The trial court very minutely examined the entire evidence and all documents and exhibits on record. The trial court's analysis of evidence also seems to be correct. The trial court has not deviated from the normal norms or methods of evaluation of the evidence. By no stretch of imagination, we can hold that the judgment of the trial court is based on no evidence or evidence which is thoroughly unreliable and no reasonable person would act upon it and consequently the judgment of the trial court is perverse. 

25. We also fail to arrive at the conclusion that the discussion and appreciation of the evidence of the trial court is so outrageously defies logic as to suffer from the vice of irrationality incurring the blame of being perverse and the findings rendered by the trial court are against the weight of evidence. The law is well settled that, in an appeal against acquittal, unless the judgment of the trial court is perverse, the Appellate Court would not be justified in substituting its own view and reverse the judgment of acquittal. 

26. The expression `perverse' has been dealt with in number of cases. In Gaya Din (Dead) through LRs. & Others v. Hanuman Prasad (Dead) through LRs. & Others (2001) 1 SCC 

501 this Court observed that the expression `perverse' means that the findings of the subordinate authority are not supported by the evidence brought on record or they are against the law or suffer from the vice of procedural irregularity. 

27. In Parry's (Calcutta ) Employees' Union v. Parry & Co. Ltd. & Others AIR 1966 Cal. 31, the Court observed that `perverse finding' means a finding which is not only against the weight of evidence but is altogether against the evidence itself. 

28. In Triveni Rubber & Plastics v. Collector of Central Excise, Cochin AIR 1994 SC 1341, the Court observed that this is not a case where it can be said that the findings of the authorities are based on no evidence or that they are so perverse that no reasonable person would have arrived at those findings. 

29. In M. S. Narayanagouda v. Girijamma & Another AIR 1977 Kar. 58, the Court observed that any order made in conscious violation of pleading and law is a perverse order. 

30. In Moffett v. Gough, 1 L.R. 1r. 371, the Court observed that a perverse verdict may probably be defined as one that is not only against the weight of evidence but is altogether against the evidence. 

31. In Godfrey v. Godfrey 106 NW 814, the Court defined `perverse' as turned the wrong way, not right; distorted from the right; turned away or deviating from what is right, proper, correct etc. 

32. The expression "perverse" has been defined by various dictionaries in the following manner: 

1. Oxford Advanced Learner's Dictionary of Current English Sixth Edition PERVERSE: Showing deliberate determination to behave in a way that most people think is wrong, unacceptable or unreasonable. 

2. Longman Dictionary of Contemporary English - International Edition PERVERSE: Deliberately departing from what is normal and reasonable. 

3. The New Oxford Dictionary of English - 1998 Edition PERVERSE: Law (of a verdict) against the weight of evidence or the direction of the judge on a point of law. 
 
4. New Webster's Dictionary of the English Language (Deluxe Encyclopedic Edition) PERVERSE: Purposely deviating from accepted or expected behavior or opinion; wicked or wayward; stubborn; cross or petulant. 

5. Stroud's Judicial Dictionary of Words & Phrases, Fourth Edition PERVERSE: A perverse verdict may probably be defined as one that is not only against the weight of evidence but is altogether against the evidence. 

33. In Shailendra Pratap & Another v. State of U.P. (2003) 1 SCC 761, the Court observed thus: 

"We are of the opinion that the trial court was quite justified in acquitting the appellants of the charges as the view taken by it was reasonable one and the order of acquittal cannot be said to be perverse. It is well settled that appellate court would not be justified in interfering with the order of acquittal unless the same is found to be perverse. In the present case, the High Court has committed an error in interfering with the order of acquittal of the appellants recorded by the trial court as the same did not suffer from the vice of perversity."

34. In Kuldeep Singh v. The Commissioner of Police & Others (1999) 2 SCC 10, the Court while dealing with the scope of Articles 32 and 226 of the Constitution observed as under:

"9. Normally the High Court and this Court would not interfere with the findings of fact recorded at the domestic enquiry but if the finding of "guilt" is based on no evidence, it would be a perverse finding and would be amenable to judicial scrutiny.

10. A broad distinction has, therefore, to be maintained between the decisions which are perverse and those which are not. If a decision is arrived at on no evidence or evidence which is thoroughly unreliable and no reasonable person would act upon it, the order would be perverse. But if there is some evidence on record which is acceptable and which could be relied upon, howsoever compendious it may be, the conclusions would not be treated as perverse and the findings would not be interfered with."

35. The meaning of `perverse' has been examined in H. B. Gandhi, Excise and Taxation

Officer-cum- Assessing Authority, Karnal & Others v. Gopi Nath & Sons & Others 1992 Supp (2) SCC 312, this Court observed as under:

"7. In the present case, the stage at and the points on which the challenge to the assessment in judicial review was raised and entertained was not appropriate. In our opinion, the High Court was in error in constituting itself into a court of appeal against the assessment. While it was open to the respondent to have raised and for the High Court to have considered whether the denial of relief under the proviso to Section 39(5) was proper or not, it was not open to the High Court re -appreciate the primary or perceptive facts which were otherwise within the domain of the fact-finding authority under the statute. The question whether the transactions were or were not sales exigible to sales tax constituted an exercise in recording secondary or inferential facts based on primary facts found by the statutory authorities. But what was assailed in review was, in substance, the correctness - as distinguished from the legal permissibility - of the primary or perceptive facts themselves. It is, no doubt, true that if a finding of fact is arrived at by ignoring or excluding relevant material or by taking into consideration irrelevant material or if the finding so outrageously defies logic as to suffer from the vice of irrationality incurring the blame of being perverse, then, the finding is rendered infirm in law."

36. The legal position seems to be well settled and consistent at least since 1934 when the Privy Council decided the case of Sheo Swarup & Others v. King Emperor AIR 1934 PC 227 in which the Court (per Lord Russell) observed as under:

"..the High Court should and will always give proper weight and consideration to such matters as

(1) the views of the trial Judge as to the credibility of the witnesses, 

(2) the presumption of innocence in favour of the accused, a presumption certainly not weakened by the fact that he has been acquitted at his trial, 

(3) the right of the accused to the benefit of any doubt, and 

(4) the slowness of an appellate Court in disturbing a finding of fact arrived at by a Judge who had the advantage of seeing the witnesses." 

The aforesaid decision was followed in subsequent judgments of this Court. [See: Surajpal

Singh & Others v. The State, AIR 1952 SC 52; Tulsiram Kanu v. The State, AIR 1954 SC 1, Atley v. State of Uttar Pradesh AIR 1955 SC 807; Balbir Singh v. State of Punjab AIR 1957 SC 216; M.G. Agarwal v. State of Maharashtra AIR 1963 SC 200; Khedu Mohton & Others v. State of Bihar, (1970) 2 SCC 450; Bishan Singh & Others v. The State of Punjab (1974) 3 SCC 288; K. Gopal Reddy v. State of Andhra Pradesh (1979) 1 SCC 355; Tota Singh & Another v. State of Punjab (1987) 2 SCC 529; Sambasivan & Others v. State of Kerala (1998) 5 SCC 412; Bhagwan Singh & Others v. State of M.P. (2002) 4 SCC 85; Harijana Thirupala & Others v. Public Prosecutor, High Court of A.P., Hyderabad (2002) 6 SCC 470; State of Rajasthan v. Raja Ram (2003) 8 SCC 180; Budh Singh & Others v. State of UP (2006) 9 SCC 731; Kalyan Singh v. State of MP (2006) 13 SCC 303; Kallu alias Masih & Others 30 v. State of MP (2006) 10 SCC 313; and State of Goa v. Sanjay Thakran & Another, (2007) 3 SCC 755]

37. In Shambhoo Missir & Another v. State of Bihar (1990) 4 SCC 17, this Court observed thus:

"We are of the view that the High Court has interfered with the order of acquittal passed by the trial court not only for no substantial reasons but also by ignoring material infirmities in the prosecution case. Hence, we allow the appeals and set aside the order of the High Court convicting and sentencing the accused in both the appeals."

38. In Chandrappa & Others v. State of Karnataka (2007) 4 SCC 415, this Court reiterated the legal position as under:

"(1) An appellate court has full power to review, reappreciate and reconsider the evidence upon which the order of acquittal is founded.

(2) The Code of Criminal Procedure, 1973 puts no limitation, restriction or condition on exercise of such power and an appellate court on the evidence before it may reach its own conclusion, both on questions of fact and of law.
 (3) Various expressions, such as, "substantial and compelling reasons", "good and sufficient grounds", "very strong circumstances", "distorted conclusions", "glaring mistakes", etc. are not intended to curtail extensive powers of an appellate court in an appeal against acquittal. Such phraseologies are more in the nature of "flourishes of language" to emphasise the reluctance of an appellate court to interfere with acquittal than to curtail the power of the court to review the evidence and to come to its own conclusion.

(4) An appellate court, however, must bear in mind that in case of acquittal, there is double presumption in favour of the accused. Firstly, the presumption of innocence is available to him under the fundamental principle of criminal jurisprudence that every person shall be presumed to be innocent unless he is proved guilty by a competent court of law. Secondly, the accused having secured his acquittal, the presumption of his innocence is further reinforced, reaffirmed and strengthened by the trial court. 

(5) If two reasonable conclusions are possible on the basis of the evidence on record, the appellate court should not disturb the finding of acquittal recorded by the trial court." 

39. In Ghurey Lal v. State of Uttar Pradesh (2008) 10 SCC 450, a two Judge Bench of this Court of which one of us (Bhandari, J.) was a member had an occasion to deal with most of the cases referred in this judgment. This Court provided guidelines for the Appellate Court in dealing with the cases in which the trial courts have acquitted the accused. The following principles emerge from the cases above: 

1. The accused is presumed to be innocent until proven guilty. The accused possessed this presumption when he was before the trial court. The trial court's acquittal bolsters the presumption that he is innocent. 

2. The power of reviewing evidence is wide and the appellate court can re-appreciate the entire evidence on record. It can review the trial court's conclusion with respect to both facts and law, but the Appellate Court must give due weight and consideration to the decision of the trial court. 

3. The appellate court should always keep in mind that the trial court had the distinct advantage of watching the demeanour of the witnesses. The trial court is in a better position to evaluate the credibility of the witnesses. 

4. The appellate court may only overrule or otherwise disturb the trial court's acquittal if it has "very substantial and compelling reasons" for doing so. 

5. If two reasonable or possible views can be reached - one that leads to acquittal, the other to conviction - the High Courts/appellate courts must rule in favour of the accused. 

40. This Court in a recently delivered judgment State of Rajasthan v. Naresh @ Ram Naresh 2009 (11) SCALE 699 again examined judgments of this Court and laid down that "An order of acquittal should not be lightly interfered with even if the court believes that there is some evidence pointing out the finger towards the accused. This Court has dealt with the scope of interference with an order of acquittal in a number of cases." 
 
41. Careful scrutiny of all these judgments lead to the definite conclusion that the appellate court should be very slow in setting aside a judgment of acquittal particularly in a case where two views are possible. The trial court judgment can not be set aside because the appellate court's view is more probable. The appellate court would not be justified in setting aside the trial court judgment unless it arrives at a clear finding on marshalling the entire evidence on record that the judgment of the trial court is either perverse or wholly unsustainable in law. 

42. In State of Uttar Pradesh v. Banne Alias Baijnath and Ors. (2009) 4 SCC 271, a two-Judge Bench of this court of which one of us (Bhandari, J.) was a member had an occasion to deal with this controversy in detail has laid down some of the circumstances in which this court would be justified in interfering with the judgment of the High Court. The circumstances discussed in the judgment are illustrative not exhaustive. 

(i) The High Court's decision is based on totally erroneous view of law by ignoring the settled legal position; 

(ii) The High Court's conclusions are contrary to evidence and documents on record; 

(iii) The entire approach of the High Court in dealing with the evidence was patently illegal leading to grave miscarriage of justice; 

(iv) The High Court's judgment is manifestly unjust and unreasonable based on erroneous law and facts on the record of the case; 

(v) This Court must always give proper weight and consideration to the findings of the High Court; 

(vi) This Court would be extremely reluctant in interfering with a case when both the Sessions Court and the High Court have recorded an order of acquittal. 

43. The appellate courts must keep in view these aforementioned observations in dealing with the appeals where the trial court has acquitted the accused. 

44 In Dhanapal v. State by Public Prosecutor, Madras (Criminal Appeal No.987 of 2002 decided on September 1, 2009), this Court again examined the aforementioned decisions and analyzed the principles emerging out of the said decisions, it seems to us that despite series of judgments, the High Court has not clearly appreciated the legal position. Unquestionably, the Appellate Court has power to review and re-appreciate the entire evidence on record. The appellate court would be justified in reversing the judgment of acquittal only if there are substantial and compelling reasons and when the judgment of the trial court is found to be perverse judgment. Interfering in a routine manner where other view is possible is contrary to the settled legal position crystallized by aforementioned judgments of this Court. The accused is presumed to be innocent until proven guilty. The accused possessed this presumption when he was before the trial court. The trial court's acquittal bolsters the presumption that he is innocent. This fundamental principle must be kept in view while dealing with the judgments of acquittal passed by the trial court.

45. We have re-examined the entire case because of the conflicting judgments of the Trial Court and the High Court. On careful marshalling of the entire evidence and the documents on record, we arrive at the conclusion that the view taken by the trial court is a possible and plausible view. The judgment of the trial court cannot be termed as perverse. The High Court ought not to have substituted the same by its own possible view. The impugned judgment of the High Court cannot stand the scrutiny of the well settled legal position which has been crystallized for more than 80 years since the case of Sheo Swarup. In the facts and circumstances of this case, we are constrained to set aside the impugned judgment of the High Court.

46. Consequently, these appeals filed by the appellants are allowed. The impugned judgment of the High Court set aside and that of the trial court is restored.