,,
R. K. Deshpande, J",,
. Admit. Heard finally by consent of the learned counsel appearing for the respective parties.,,
1. Both these appeals filed under Section 37 of the Arbitration and Conciliation Act, 1996 (for short “the said Actâ€) challenge the common",,
judgment and order dated 21st January, 2020, delivered by the learned Single Judge of this Court in Arbitration Petition Nos. 977 of 2016 and 978 of",,
2016, in exercise of his jurisdiction under Section 34 of the said Act.",,
2. The facts, in brief, not in dispute, leading to the case are as under : -",,
2.1 The respondent, in both these matters, is the original claimant, whereas the appellant is the original respondent before the Arbitral Tribunal. The",,
parties shall be referred accordingly to their status. The dispute between the parties pertains to two franchisee agreements - one dated 20th May,",,
2008, in respect of shop Nos. 1 and 2, Linking Road (Khar Retail Outlet Premises) and another dated 7th June, 2008, in respect of Lower Parel Retail",,
Outlet Premises.,,
2.2 The claimant filed the statement of claim on 13th November, 2010, praying for an aggregate sum of Rs.12,19,86,457/- with interest at the rate of",,
24% per annum from the date of filing of the statement of claim till the payment/or realisation. The claim was opposed by the appellant herein by filing,,
written statement on 8th December, 2010. The appellant also filed counter claim inter alia praying for a sum of Rs. 3,16,06,316.50 paise with interest",,
at the rate of 15% per annum from the date of filing counter claim up to the date of award and interest at the rate of 18% per annum from the date of,,
award till payment.,,
2.3 During the course of meetings before the arbitrator, it was decided that the proceedings of reference, to a limited extent would be split into two",,
and the arbitrator would pass a partial final award covering all issues which arise for consideration, other than the final calculation and quantification of",,
the amounts awarded (if any) to either party together with interest thereon.,,
2.4 On 5th June, 2015, the arbitrator answered 13 issues, which were framed and passed partial final award. The final award was passed on 14th",,
December, 2015. The claimant was awarded a sum of Rs.7,69,97,242/- with further interest on the principal sum of Rs.3,92,51,369/- at the rate of",,
18% from the date of award. Aggrieved by the partial final award dated 5th June, 2015, and the final award dated 14th December, 2015, Arbitration",,
Petition Nos. 977 and 978 of 2016 were preferred under section 34 of the said Act, which are decided by a common judgment and order dated 21st",,
January, 2020, passed by learned Single Judge of this Court. This is the subject matter of challenge in both these appeals before us.",,
3. The challenge to the partial final award in both the matters delivered on 5th June, 2015, was rejected being barred by time as prescribed under sub-",,
section (3) of Section 34 of the said Act. However, the final awards passed on 14th December, 2015, are modified by reducing the rate of interest",,
awarded by the arbitrator at 18% per annum for pendente lite period and future interest is reduced to 9% per annum. The challenge to the rest of final,,
award is rejected by upholding it.,,
4. The learned Single Judge has held that the issues decided by the arbitrator in partial final award dated 5th June, 2015, in both the matters had sub-",,
sumed within expression “arbitral award†under Section 2(1)(c) of the said Act and challenge to it is barred by time prescribed under Section,,
34(3) of the said Act. It further holds that most of the grounds in the petition relate to the challenge to the partial final award, which has attained",,
finality and its validity cannot be questioned in a challenge to a final award passed on 14th December, 2015.",,
5. We have heard Mr. Kevic Setlvad, learned senior advocate assisted by Mr. Sushant Prabhune for the appellant in both the appeals and Mr. Prateek",,
Sekseria, learned counsel for the respondent/claimant, in whose favour, the awards are passed by the arbitrator.",,
6. Mr. Setlvad, the learned senior advocate appearing on behalf of the appellants has urged that the view taken by the learned Single Judge that the",,
partial final award passed in this case had sub-sumed within the expression “arbitral awardâ€, is in ignorance of two vital tests; one of the",,
“functus officio†and another of “executabilityâ€. According to him, after passing the partial final award in the present case, the arbitrator did",,
not become functus officio but was required to pass final award, which only becomes executable and enforceable under Section 34 of the said Act.",,
According to him, mere declaration of certain rights and liabilities in the partial final award is not enough to hold that it sub-sumed within the",,
expression “arbitral award†under Section 2(1)(c) of the said Act so as to attract the bar of limitation specified under sub-section (3) of Section 34,,
of the said Act to challenge the final award passed on 14th December 2015 under Section 34 of the said Act. Reliance is placed upon the decision of,,
the Apex Court in the case of Satwant Singh Sodhi v/s. State of Punjab [(1999) 3 SCC 487], the decision by Court of Appeals for the Third Circuit in",,
America delivered on 29th September 2015 in the case of Robinson v. Littlefield [Manu/FETC/0872/2015], decision of the learned Single Judge of this",,
Court in the case of Harinarayan v. Shardeal FC Pvt Ltd [2003(2) Mh.L.J. 592, and a decision of the learned Single Judge of this Court in the case of",,
Commissioner, Kolhapur Municipal Corporation v. Fairdeal constructions [(2008) 1 Bom CR 403]",,
7. Mr. Sekseria, learned counsel appearing for the respondent-claimant, has urged that the learned Single Judge has, after taking into consideration the",,
facts and circumstances of the case, the evidence available on record and the arguments advanced, taken a possible view of the matter holding that",,
the partial final award passed in this case had sub-sumed within the expression of “arbitral award†under Section 2(1)(c) of the said Act, which",,
does not call for any interference. He further submitted that the learned Single Judge has placed reliance upon the decision of this Court in the case of,,
Indian Farmers Fertilizers Co-operative Ltd v/s. Bhadra Products [AIR-2018 SC 627] and another decision of the Apex Court in the case of National,,
Thermal Power Corporation v/s. Siemens Atkeingesellschaft [(2007) 4 SCC 451] and the decision of Delhi High Court in the case of Jhang Co-,,
operative Group Housing Society Ltd vs. Pt. Munshi Ram and Associates [ILR (2013) II Delhi 1632.] He further submitted that decisions relied upon,,
by the learned counsel for the petitioner have also been considered.,,
8. It is not disputed before us that if in the facts of this case it is held that the partial final award passed on 5th June 2015 had sub-sumed within the,,
expression “arbitral award†under section 2(1)(c) of the said Act, then, the bar of limitation contained under sub-section (3) of section 34 of the",,
said Act will be attracted. Therefore, the question which falls for our consideration in these two appeals is formulated as under :",,
“Whether the partial final award passed in this case by the Arbitrator on 5th June 2015 had sub-sumed in the expression “arbitral awardâ€,,
under section 2(1)(c) of the Arbitration and Conciliation Act, 1996 so as to attract the bar of limitation contained under sub-section (3) of section 34, to",,
challenge it under section 34 of the said Act.“,,
9. In order to consider the question framed, we would like to understand first what is an “arbitral award†and an “interim award†or",,
“partial final awardâ€. The partial final award is called as an interim award. The provision of section 2(1)(c) of the said Act states that an,,
“arbitral award includes an interim awardâ€. The expressions “award†or “interim award†or “partial final award†are nowhere,,
defined under the said Act. We have gone through the various judgments cited before us by the learned counsel appearing for the parties. It is not,,
necessary for us to deal with the facts involved in all those judgments individually and it would be suffice, if we state the law as has been laid down",,
1.,"Does the Arbitral Tribunal not have jurisdiction to
decide the present disputes for the reasons alleged in
paragraph 1 of the Written Statement ?","Does not arise as the Respondent
did not press the same.
2.,"Do the Respondents prove that representations wre
made and assurances were given by the Claimant as
alleged in paragraphs 2(iii)(a) to (e) of the Written
Statement ?",No.
3.,"Does the Claimant prove that the Respondents took
over the obligations to run the showroom under the
Agreement dated 07.06.2008 as contended in
paragraph 9 of the Statement of Claimant ?",Yes.
4.,"Does the Claimant prove that the Respondents had
agreed to pay minimum Guarantee Commission in
terms of the Franchisee Agreement and that the
Claimant is entitled to claim the same from the
Respondents for the period upto August, 2009 ?","Yes and even thereafter by way of
damages for the balance lock in
period.
5.,"Does the Claimant prove that the Claimant had agreed
for reduction of the Minimum Guarantee Commission
to 50% effect from November 2008 as alleged in the
Written Statement ?",No.
6.,"Does the Claimant prove the breach of its obligation
under the Franchise Agreement on the part of the
Respondents ?",Yes.
7.,"Do the Respondents prove that the Respondent were
entitled to terminate the Agency / Franchisee
Agreement on account of the breach of its obligations
by the Claimant ?",No.
8.,"Does the Claimant prove that they are entitled to
Minimum Guarantee Commission in terms of the
Franchise Agreement from the Respondents for the
balance period between September 2009 and May
2013 ?","Yes, by way of damages only up to
the expiry of the lock in period and
subject to the deductions set out
herein.
9.,"Does the Claimant prove that it is entitled to an award
in the sum of Rs.3,15,21,746.0 (Rupees Three Crores
Fifteen Lacs Twenty one Thousand seven hundred
and forty six only) or any part thereof as claimed in the
Statement of Claim ?","The amount of Award will be
adjudicated upon after parties
submit their calculations based upon
the principles enumerated herein.
10.,"Do the Respondents prove that the Respondents are
entitled to an award for Rs.1,10,57,746.65/- (Rupees
one Crore Ten Lacs Fifty seven Thousand Seven
hundred forty six and sixty five paise only) or any part
thereof as claimed in the counter claim ?","N o. However, the amount of
security deposit would be adjusted
against the amounts due to the
Claimant.
11.,"Whether any party is entitled to interest on any amount
awarded, if so at what rate and from what date ?","The Claimant is entitled to interest
at the rate of 24% per annum as
per clause 5(g) of the agreement in
respect of the MGC amounts due
upto and till the date of invocation.
Post invocation the Claimant is
awarded pendente lite and post
award interest at 18% p.a.. The
detailed calculations in this regard
should be submitted by the parties.
12.,What Award ?,"The present Award is partial final
award determining theissues set out
herein. The quantification of the
claims would be carried out on
calculations being submitted by the
parties hereafter based on the
findings herein and after hearing
submissions thereon.
13.,What order as to costs ?,"The same will be decided in the
final award on quantification of the
claims.
direction to pay the same, so as to make that partial final award and the final award executable and enforceable under section 36 of the said Act as if",,
it were a decree of a civil Court.,,
17. It is neither necessary for us nor we intend to go into the question in detail as to whether the partial final award dated 5th June 2015 sub-sumed,,
within the expression an “arbitral award†under section 2(1)(c) of the said Act, though we have, to some extent dealt with it in earlier paras. We",,
have already held that it is essentially a question of fact and the finding recorded by the learned Single Judge on this aspect is based upon the material,,
available on record, the appreciation of the controversy adjudicated by the partial final award and its nature, extent and intendment. We concur with",,
such a view expressed by the learned Single Judge.,,
18. Out of the three predominant tests pointed out in earlier paragraphs, there is no dispute about test No.[i] i.e. partial final award satisfies the",,
requirements of sub-sections (1), (2) and (3) of Section 31 of the said Act. After going through the judgment delivered by learned Single Judge, we",,
have no hesitation to record the finding that the partial final award passed in the present matter on 15th June, 2015, is in relation to the matters with",,
respect to which, final award was passed on 14th December, 2015. Thus, the test No.[ii] is satisfied in terms of the provision of sub-section (6) of",,
Section 31 of the said Act. In our view, the nature, extent and intendment of the partial final award is to enable the arbitrator to determine the amount",,
payable with interest on the basis of rights and liabilities of the parties arising out of the agreement in question. Thus, the test No.[iii] is also satisfied.",,
19. Relying upon the decision of the learned Single Judge of this Court in the case of Commissioner, Kolhapur Municipal Corporation (supra), it is",,
urged by Mr. Setlvad, the learned senior counsel appearing on behalf of the appellants that it is the test of executability of an award, which is required",,
to be applied to find out whether an interim award can assume the character of final award. According to him, mere declaration of rights and liabilities",,
without its enforceability is not enough to call such an order partial final award so as to attract the bar under sub-section (3) of section 34 of the said,,
Act.,,
20. We have gone through the aforesaid decision of this Court. The question involved was whether an order made by the sole arbitrator on 23rd,,
November 2005 was an executable award. Relying upon the statement made by applicantâ€"Municipal Corporation, the respondent proprietory",,
concern in the said case was held entitled to receive certain amounts. A declaration was granted in respect of it. The contention of the applicantâ€",,
Corporation was that the order merely declared the entitlement to receive the amount referred to therein and it was not executable. The contention,,
was rejected by the trial Court against which civil revision application preferred before this Court was allowed. It was held that such order cannot be,,
considered to be an award enforceable under the Code of Civil Procedure, 1908, as if it were a decree of the Court, as provided for in section 36 of",,
the said Act.,,
21. No doubt, that in the case of Commissioner, Kolhapur Municipal Corporation (cited supra), the learned Single Judge of this Court was considering",,
the question of executability of an interim award which ascertained the amount to be paid and also determined that the interest was payable equal to,,
PLR of the State Bank of India for each year from 1996-97 on the amount that has been calculated. Three things are significant in this decision :,,
(1) that the Court found that interim award was deficient in issuing specific positive direction to pay the amount determined;,,
(2) that the exact rate of interest was not specified; and,,
(3) that there was no determination of liability which constituted the basis to hold that the interim award was not executable.,,
22. In our view, the decision is clearly distinguishable for the following reasons :",,
(1) In the present case, it is not the question of executability of an interim award that is involved, but it is the question of interim award assuming the",,
character of an arbitral award under section 2(1)(c) of the said Act so as to attract the bar of limitation under sub-section (3) of section 34 of the said,,
Act, which is involved.",,
(2) In the present case, rights and liabilities of the parties arising out of the agreement are determined by partial final award, whereas in the reported",,
judgment, the Court specifically made it clear that the interim award does not declare the liabilities in law to pay the amount.",,
(3) In the present case, there is an agreement determining the procedure under section 19 of the said Act stating that it will be in two parts :-",,
(a) to determine the rights and liabilities by the partial final award; and,,
(b) the amount if any due shall be decided in the final award.,,
This does not find place in the reported judgment. The decision is, therefore, not at all applicable to the facts of the present case.",,
23. In our view, the question of executability or the enforcement of an arbitral award under section 2(1)(c) of the said Act is governed by section",,
36 therein. The question involved in the present case is of setting aside of partial final award by invoking the provision of section 34 of the said Act,,
and it does not depend upon the executability or enforceability of such arbitral award. The intendment is to pass final award which may become,,
executable or enforceable. The proceedings under section 34 of the said Act regarding challenge to an interim arbitral award, cannot be confused or",,
mixed up with the proceedings of executability or enforcement of final arbitral award under section 36 of the said Act. The provision of section 36,,
operates after an arbitral award becomes executable or enforeceable and the period of limitation prescribed under section 34 expires to challenge an,,
arbitral award. The test of executability or enforceability of an arbitral award under section 36 cannot be artificially invoked to bring the challenge to,,
an interim award or partial final award within the period of limitation prescribed under sub-section (3) of section 34 of the said Act on the ground that,,
it has now become executable or enforceable. Merely because the interim award is found to be declaratory in nature, without making it executable,",,
would not mean that it cannot assume the character of an arbitral award under section 2(1)(c) of the said Act so as to attract bar of limitation under,,
sub-section (3) of section 34 of the said Act.,,
24. We tried strenuously, to ascertain from Mr. Setlvad, the learned senior counsel appearing on behalf of appellant, the basis of his argument that an",,
arbitral award, whether interim or final, if it is declaratory in nature of the rights and liabilities, cannot be made a subject matter of challenge under",,
section 34 of the said Act, unless it is made executable. However, we remained unsuccessful. We also asked Mr. Setlvad, learned senior counsel to",,
point out to us any provision of law or any judgment, either of the Apex Court or any High Court in support of such contention advanced. However,",,
we are at loss to know any such provision or judgment.,,
25. Relying upon the decision of the Apex Court in case of Satwant Singh Sodhi (supra), it is urged that another vital test to be applied is that of the",,
functus officio. It is urged that after passing the partial final award, the arbitrator did not become functus officio, but is required to pass final award,",,
which only becomes executable and enforceable under section 34 of the said Act. It is not possible to accept such contention for the reason that in the,,
said decision itself, it is held by the Apex Court in paragraph 11, that “an arbitrator having signed his award becomes functus officio, but that did",,
not mean that in no circumstances, could there be further arbitration proceedings, where the award was set aside or that the same arbitrator could",,
never have anything to do with the award with respect to the same disputeâ€. In the decision of this Court in the case of Harinaryan G Bajaj (cited,,
supra), the learned single Judge has held that the arbitrator becomes functus officio after passing of an “interim award†in respect of the subject",,
matter of such award made and to that extent only. It cannot further decide that part of claim or counter claim which has been adjudicated by an,,
interim award.,,
26. In our view, the partial final award passed in these matters has determined completely, all the rights and liabilities of the parties and will have the",,
force even after the final award is delivered. The final award, in this case, is completely based upon the determination in the partial final award. In the",,
absence of challenge to partial final award, the challenge to the final award cannot succeed. Therefore, the test of functus officio would not be",,
decisive of the question for our consideration. The contention is, therefore, rejected.",,
27. It is an undisputed position that if in the facts of this case, it is held that the partial final award passed on 5th June 2015 had sub-sumed within the",,
expression “arbitral award†under section 2(1)(c) of the said Act, the bar of limitation contained in sub-section (3) of section 34 of the said Act",,
will be attracted and the challenge to it will have to be rejected on the ground it is barred by law of limitation. Taking into consideration the aforesaid,,
discussion, we answer the question formulated by us holding that the partial final award passed in this case by the arbitrator on 5th June 2015 had sub-",,
sumed within the expression “arbitral award†under section 2(1)(c) of the Arbitration and Conciliation Act, 1996 so as to attract the bar of",,
limitation contained under sub-section (3) of section 34, to challenge it under section 34 of the said Act. We further hold that there is no case made out",,
for interference in our appellate jurisdiction in a challenge to final award passed on 14th December 2015 adjudicated upon by the learned Single Judge.,,
28. In the result, both these appeals are dismissed. No order as to costs.",,
At this stage, learned counsel appearing for the appellant pray for continuation of interim order, which was operating till 13th March, 2020, on which",,
date, we heard learned counsel appearing for the respective parties and closed the matters for judgment. Undisputedly till this date, the Bank",,
Guarantee has not been invoked though a period of operation of stay has expired. The prayer is opposed by learned counsel appearing for the,,
respondent in both the matters.,,
In view of the fact that the interim order was operating till 13th March, 2020, we extend it by further period of six weeks from today. After expiry of",,
this period, the interim order shall stand automatically vacated without reference to this Court and respondent shall be at liberty to invoke the Bank",,
Guarantee.,,
