APP307/07

IN THE HIGH COURT OF JUDICATURE AT BOMBAY

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ORDINARY ORIGINAL CIVIL JURISDICTION

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APPEAL NO.307 OF 2007
IN
ARBITRATION PETITION NO.408 OF 2005

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Artson Engineering Ltd. … Appellant
v/s
Indian Oil Corporation Ltd. … Respondent

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Mr. Sharan Jagtiani a/w R. K. Satpalkar i/b Mulla & Mulla & Craigie
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Blunt and Caroe for the Appellant.
Mr. Mainsh Bhatt, Senior Advocate, i/b D Brijesh for the Respondent.
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CORAM : MOHIT S. SHAH, C.J. &
B.P. COLABAWALLA, J.
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Reserved on : 16th December, 2014.

Pronounced on : 9th January, 2015.
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JUDGMENT [ Per: B.P. Colabawalla J. ]:

1. This Appeal under section 37 of the Arbitration and Conciliation

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Act, 1996 (“the Act”) takes exception to two orders passed by the learned

Single Judge. The Appellant herein was the Claimant before the Arbitral

Tribunal. The Tribunal passed an Award dated 30th June, 2005 in favour of

the Appellant and the Respondent challenged the same by filing a Petition
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under section 34 of the Act. In the said Petition, the first order was passed

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by the learned Single Judge dated 9th November, 2006 (“1st impugned

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order”) whereby the Award passed by the Arbitral Tribunal in favour of

the Appellant was set aside. The second order was passed by the learned

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Judge on 21st December, 2006 (“2nd impugned order”) which was on an

application for “speaking to the minutes of the order” filed by the

Respondent. By this order, the learned Judge, added further reasons in the

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1st impugned order for rejecting another claim granted to the Appellant.
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This Appeal was admitted by a Division Bench of this Court on 26 th April,
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2007 and has now come up for final hearing before us.
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2. The facts stated briefly, and which are material for our purpose, are
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that the Appellant had bid for a contract for execution of work of a “Crude

Distribution System” for AU-V project at the Respondent's Gujarat

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Refinery site at Vadodara. By their fax dated 23 rd February 1998, the

Respondent accepted the Appellant's bid and the work was awarded to the
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Appellant at a value of Rs.14,03,30,240/-. The said contract was governed

by the General Conditions of Contract (GCC) and Special Conditions of

Contract (SCC). The Contract Completion Date was fixed as eight months

from the date of the said fax i.e. 22nd October, 1998.

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3. As per the requirement of the contract, the Appellant established two

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bank guarantees (i) towards a security deposit for Rs.35,08,260/-; and (ii)

towards Mobilization Advance and Performance of Contract for

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Rs.1,40,33,000/-. The Appellant was unable to adhere to the Contract

Completion Date i.e. 22nd October, 1998 and completed the work only on

6th September, 2000. A Completion Certificate was issued by the

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Respondent to the Appellant on 3rd October, 2000 and on 6th October, 2000
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the Appellant raised its final bill for Rs.2,37,87,663/-.
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4. As disputes arose between the parties, the Respondent wrote a letter
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to the bankers of the Appellant, requesting them to renew the aforesaid

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bank guarantees, failing which the said letter was to be treated as an

invocation of the same.

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5. In response to the said letter, on 10th January 2002, the Appellant

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filed a Petition under section 9 of the Act (Arbitration Petition No.31 of

2002), inter alia seeking to restrain the Respondent from invoking the said

bank guarantees. Whilst the section 9 Petition was pending, the Appellant

also addressed a notice dated 24th January, 2002 invoking the arbitration

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clause in General Conditions of Contract. The section 9 Petition was

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ultimately disposed of in terms of the consent terms that were drawn up

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between the parties and filed before the Court on 1 st April, 2002. The

relevant portion of the consent terms read as under :-

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“The Petitioner and Respondent No.1 have arrived at a consensus,
which is recorded hereunder :-
1. The Petitioner and the Respondent No.1 agree that the
arbitration between them shall be time bound and shall be
concluded within a period of 8 months from the month following

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the month of appointment of Arbitrator. The Arbitrator shall also
be bound by this condition. Subject to the above the Petitioner
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and the Respondent No.1 by mutual consent may extend the time
to conclude the arbitration, if necessary.
2. In lieu of the bank guarantee No.98/85 for Rs.35,08,260 and
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Guarantee No.98/84 for Rs.1,40,33,000/- the Petitioner has
agreed to furnish a fresh bank guarantee for an amount of
Rs.65,00,000/- Lakhs. The said bank guarantee shall be kept in
force till the final determination of the disputes by the Arbitral
Tribunal by an Award unless the Arbitral Tribunal on an
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application by the Petitioner decides otherwise. Upon furnishing

the guarantee for Rs.65,00,000/- valid upto 31 st December 2002
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the Respondent No.1, IOCL agrees to return guarantees bearing

Nos.98/85 and 98/84 both dated 26.03.1998 to the Petitioner.
3. The Petitioner agrees and undertakes before this Hon'ble Court
that any liability of whatsoever nature towards its sub-
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contractors/vendors/sub-agencies by whatsoever name or

nomenclature, engaged by the Petitioner for the AU-V project
work of Respondent No.1 shall be that of the Petitioner alone
and that the Petitioner shall indemnify the Respondent No.1,
IOCL with regard to any claims of these parties.
4. It is agreed between the parties that the guarantee for
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Rs.65,00,000/- shall be kept in force upto 31 st December 2002

unless the Arbitral Tribunal otherwise. In the event the
Arbitrator decides that the guarantee for Rs.65,00,000/- is
required to be extended, Petitioner undertakes to extend the
same for such period as determined by the Arbitrator.”

(emphasis supplied)

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6. On the very same day, i.e. on 1 st April 2002, the Appellant also

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agreed to the appointment of the Arbitrator, Mr H. Parikh, to act as the

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Sole Arbitrator. Accordingly, the Respondent appointed Mr H. Parikh to

act as the Sole Arbitrator under its letter dated 2 nd April, 2002. As Mr H.

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Parikh could not make his Award in the time frame fixed in the consent

terms (eight months), a new Arbitrator was appointed in his place, who

was a retired Judge of this Court (Mr Justice A.B. Palkar). Before the

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Arbitral Tribunal (the new Arbitrator), the Appellant had in all, made seven
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claims described as claims (a) to (g) and which were as follows:-
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(a) Claim on account of items in the Schedule of Rates
(SOR) amounting to Rs.82,19,114/- together with
interest at the rate of 18% p.a. from 3rd October, 2000
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till the date of payment;

(b) Claim for Rs.1,40,00,000/- (Rs.1.4 crores) withheld on
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account of liquidated damages together with interest at

the rate of 18% p.a. with effect from 3 rd October, 2000
till the date of payment;
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(c) Claim on account of amounts appropriated by the

Respondent on the ground of other recoveries
amounting to Rs.16,58,574/- together with interest at
the rate of 18% p.a. with effect from 3 rd October, 2000
till the date of payment;
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(d) Claim of Rs.26,97,759/- being the cost incurred by the

Claimant in keeping the bank guarantee in force
beyond the period required under the contract together
interest at the rate of 18% p.a. till the date of payment;
(e) Claim of Rs.16,33,142/- being recovery of interest
charged on advance of Rs.1,40,00,000/- (Rs.1.4
crores);

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(f) Claim for Rs.42,00,000/- on account of the Claimant's

extended stay at the project site together with interest

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thereon;
(g) Claim of Rs.61,00,000/- on account of extra work

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together with interest thereon;

7. The parties appeared before the Arbitral Tribunal, filed their

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pleadings, and produced their respective evidence. After hearing the parties

and perusing the relevant terms of the contract and the evidence before it,

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the Arbitral Tribunal granted claims (a), (b), (c), (d) and (g) (either in part
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or full), and rejected claims (e) and (f). The operative part of the Arbitral
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Award reads as under:-

“150. Respondent will has to pay to the claimant in respect of various

claims set out in the claim statements below with interest at 18 % per
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annum from the dates mentioned against in the respective heads.

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Claim A - Rs.82,19,114/- with effect from 01.11.2000

Claim B - Rs.1,40,00,000/- with effect from 01.11.2000
Claim C - Rs.16,58,574/- with effect from 01.11.2000
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Claim D - Rs.13,96,756/- with effect from 01.02.2002

Claim E - Nil as claim is rejected
Claim F - Nil as claim is rejected
Claim G - Rs.61,00,000/- with effect from 01.11.2000.”
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Accordingly, the Arbitral Tribunal passed its Award directing the

Respondent to pay the Appellant a sum of Rs.3,12,74,444/- together with

interest thereon as more particularly set out in the Award.

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8. Being aggrieved by the Arbitral Award, the Respondent herein

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challenged the same under the provisions of section 34 of the Act. After

hearing the parties, by the 1st impugned order, the learned Single Judge

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allowed the section 34 Petition and set aside the entire Arbitral Award. The

principal ground of challenge to the Arbitral Award was that the Arbitral

Tribunal could not have issued directions against the Respondent herein

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(the Petitioner before the learned Single Judge), to make payment of any
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amount against claim (d). Claim (d) was for Rs.26,97,759 being the cost
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incurred in keeping the bank guarantee in force beyond the period required

under the contract, together with interest at 18% per annum till payment.
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This claim was partly allowed by the Arbitral Tribunal, to the extent of
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Rs.13,96,756/-. After analyzing certain provisions of the contract, the

learned Judge came to the conclusion that claim (d) could not have been
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granted in favour of the Appellant as it was not a notified claim as

contemplated under the contract, and therefore the Arbitral Tribunal had no
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jurisdiction to award any amount under claim (d). On this basis, and with

no discussion with reference to any other claims, the entire Arbitral Award

was set aside.

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9. After the passing of the 1st impugned order, the Respondent moved

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an application for “speaking to the minutes of the order” on the ground

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that claim (g) was also a non-notified claim and therefore, for the reasons

given in the 1st impugned order in relation to claim (d), claim (g) also could

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not have been awarded by the Arbitral Tribunal. The learned Judge,

accepting the aforesaid contention, held that claim (g), like claim (d) was

also not a notified claim and therefore the Arbitral Tribunal ought not to

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have granted claim (g) also. The learned Judge therefore proceeded to pass
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the 2nd impugned order and made substantial modifications in the 1 st
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impugned order. Being aggrieved by these two orders, the Appellant

(original Claimant) is in Appeal before us under section 37 of the Act.

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10. Mr Jagtiani, the learned counsel appearing on behalf of the

Appellant, challenged both the impugned orders on several grounds. The

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first and main ground of challenge was that the learned Single Judge could

not have set aside the entire Award when there was no discussion at all in
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the 1st impugned order with reference to claims (a) to (c) and (g). He

submitted that the only discussion in the 1st impugned order was with

reference to claim (d), and on that basis, the learned Single Judge set aside

the entire Arbitral Award. This, according to Mr Jagtiani, was

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impermissible and made the order of the learned Single Judge vulnerable

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to challenge. He submitted that there was not even a finding in either of

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the impugned orders that the claims could not be severed and therefore, by

allowing the Petition with reference to claim (d) or claim (g), the entire

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Award was required to be set aside.

11. Mr Jagtiani further submitted that it is now well settled that an

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Arbitral Award can be severed and the power of the Court under section 34
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of the Act is wide enough to apply the doctrine of severability and / or pass
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such other directions as are contemplated under section 34(4) of the Act.

There is nothing in the provisions of the Act which would debar the Court
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from applying the doctrine of severability, provided it is otherwise called

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for in the facts and circumstances of the case and in accordance with law,

was the submission of Mr Jagtiani. In support of the aforesaid submission,

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Mr Jagtiani relied upon a Full Bench Judgment of this Court in the case of

R.S. Jiwani v/s Ircon International Ltd. 1 and a judgment of the Supreme
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Court in the case of J.G. Engineers Pvt. Ltd. v/s Union of India and Anr 2.

Relying upon the aforesaid two judgments, Mr Jagtiani submitted that it

was now well settled that the principle of severability applied to setting

1 2010 (1) ALL MR 605 : (2010) 1 Bom CR 529 (FB)

2 (2011) 5 SCC 758

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aside an Arbitral Award and the Court had the power to segregate the

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Award on items/claims which did not suffer from any infirmity and uphold

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it to that extent. In the present case, Mr Jagtiani submitted that claims (a)

to (d) and (g) were ex-facie independent and distinct claims, and therefore

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the learned Single Judge was in grave error in setting aside the entire

Arbitral Award only on the basis that the Award was unsustainable in

relation claim (d). This was more so in the facts of the present case because

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the learned Judge did not render any finding that the claims were such that
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they could not be severed, was the submission. He submitted that in the
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present case, there was absolutely no discussion in the 1 st impugned order

as to how claims (a), (b), (c) and (g) were unsustainable. He submitted that
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the only discussion with reference to claim (g) was in the 2 nd impugned
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order which was passed on an application for “speaking to the minutes of

the order”. This could not have been done in the limited scope of such an
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application, as admittedly there was no mistake in the original order dated

9th November, 2006 (1st impugned order), was the submission of Mr.
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Jagtiani. He submitted that an order in an application for “speaking to the

minutes of the order” could only be passed to correct clerical or

typographical errors or any other apparent error that occurred due to

oversight. The Court could not, in an application for “speaking to the

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minutes of the order”, either review or substantially modify/clarify the

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original order, was the submission. In support of this proposition, Mr.

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Jagtiani placed reliance on a Division Bench Judgement of the Gujarat

High Court in the case of Kotak Mahindra Bank Ltd. Vs. Official

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Liquidator of M/s. Gujarat BD Luggage Ltd. & Ors. 3 He therefore

submitted that both the impugned orders ought to be set aside and the

Arbitration Petition be remanded back to the learned Single Judge for

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hearing the challenge to the Arbitral Award on all the claims including
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claims (d) and (g).
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12. Mr Jagtiani next submitted that even otherwise, the learned Single
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Judge erred in holding that claim (d) was not arbitrable. He submitted that
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the procedure for notification and the mechanism provided under clause 6

read with clause 9 of the GCC, could never apply in the case of claim (d)
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as the cause of action for such a claim arose only after the final bill was

submitted. Claim (d) pertained to the cost incurred by the Appellant in

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keeping the substituted bank guarantee alive after the expiry of the

contract. This claim therefore could never have been notified in the final

bill, was the submission. The submission of the Mr Jagtiani was that from

3 2012 SCC Online Guj 4339

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a holistic reading of the Arbitration Agreement, it was evident that the

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parties intended to submit all disputes to arbitration. The disputes that

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related to work under the contract could be entertained by following the

“notification procedure” in the contract, whereas other disputes, such as

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claim (d) and which were inherently incapable of being subject to the said

notification procedure, could also be entertained by the Arbitral Tribunal

as they too were encompassed in the Arbitration Agreement. This

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submission was based on the ground that it could have never been the
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intention of the parties that disputes such as the one arising in claim (d),
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would be adjudicated by a civil suit even though clearly arising out of the

contract. He further submitted that the Arbitration Agreement could not be

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given such a narrow construction and must be read to reflect the

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understanding between the parties viz. to submit all disputes to arbitration.

Any other understanding would create a situation where the disputes before
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the final bill would be subject to arbitration whereas disputes arising

thereafter would have to be adjudicated by Civil Courts, leading to

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multiplicity of proceedings and clearly against the intention of the parties.

We must state over here that Mr Jagtiani very fairly stated before us that

this argument was not canvassed before the learned Single Judge and has

been canvassed for the first time in this Appeal.

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13. In the alternative to the above argument, Mr Jagtiani submitted that

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there was an additional reason for holding that the Arbitral Tribunal had

jurisdiction to award claim (d). This argument was canvassed on the basis

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of the consent terms (dated 1st April, 2002) arrived at in the Petition filed

under section 9 of the Act. Under these consent terms, the Appellant

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substituted the two bank guarantees furnished under the contract (for

Rs.35,08,260/- &
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Rs.1,40,33,000/-) with a bank guarantee of

Rs.65,00,000/-. Mr Jagtiani submitted that by this interim arrangement,

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which is by definition in aid of and ancillary to the final reliefs, the matter

of final directions regarding the substituted bank guarantee was obviously

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within the domain of the Arbitral Tribunal's jurisdiction. Under the said
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consent terms, the Appellant was allowed to apply, even pending the

arbitration, for discharge of the bank guarantee. Though this was not done,
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according to Mr Jagtiani, it exemplifies the Arbitral Tribunal's jurisdiction

on this matter. If the Arbitral Tribunal necessarily had jurisdiction to

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continue or discontinue this interim arrangement as part of the final award,

it would equally have jurisdiction to award the costs to the Appellant for

having furnished and keeping alive the substituted bank guarantee. He

submitted that as held by the Arbitral Tribunal, this substituted bank

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guarantee had to be kept alive by the Appellant for no fault of theirs. He

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therefore submitted that as per the consent terms arrived at between the

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parties, there was a novatio to the Arbitration Agreement and therefore

clearly claim (d) was arbitrable. Any other reading of the consent terms

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would have the effect of partially curtailing the jurisdiction, was the

submission of Mr Jagtiani. He therefore submitted that even on merits, the

learned Single Judge was in error in holding that claim (d) was not

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arbitrable as it was not a notified claim.
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14. On the other hand, Mr Manish Bhatt, the learned Senior Counsel

appearing on behalf of the Respondent, submitted that all the claims were
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so intertwined that it necessarily meant that different claims granted in the

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Award could not be severed. In this regard, he laid particular stress on

paragraph 65 of the Award , which reads as under :-

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“REASONS FOR THE FINDINGS

65. Point Nos. 1), 2) I to VII:- these points are so intertwined that it
is convenient to discuss them together. The major controversy between
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the parties is on the ground of delay. Admittedly the delay is of 23

months as the contract completion date CCD was initially agreed as
22.10.1998 and the contract was in fact completed on 06.09.2000.
However, before we enter into the controversies, it is necessary to point
out some technical aspects of the matter regarding which the facts are
more or less undisputed.”
(emphasis supplied)

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15. He submitted that in view of these facts, the learned Single Judge

was fully justified in setting aside the entire Award on the ground that

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claim (d) was not arbitrable. In the facts of the present case, it was not

possible to severe the separate claims made before the Arbitral Tribunal

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and therefore, there was no infirmity in the impugned order, was the

submission of Mr Bhatt. He further submitted that the contention regarding

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severability of claims was not taken before the learned Single Judge and
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neither has this contention been specifically raised in the Appeal Memo
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and therefore we ought not to take cognizance of this argument for the first

time in Appeal before us.

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16. Without prejudice to the aforesaid argument, on the question of

remand, Mr Bhatt submitted that even if this Court was inclined to remand
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the matter back to the learned Single Judge for fresh consideration, the

same may be done only with reference to claims (a), (b) and (c). On the
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other two claims viz. claims (d) and (g), the learned Judge has given

specific reasons which ought not to be interfered with by this Court. He

therefore submitted that the remand if at all, ought to be restricted only

with reference to claims (a), (b) and (c).

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17. We have heard the learned counsel at quite some length. We have

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perused the Appeal paper-book as well as the written submissions

submitted by both the parties. On the issue of severability, we find

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considerable force in the argument of Mr Jagtiani. On perusing the Arbitral

Award, we find that claims (a), (b), (c) and (g) were independent of and

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distinct from claim (d). In other words, merely because the learned Judge
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held that claim (d) was not arbitrable, did not ipso facto mean that claims

(a), (b), (c) and (g) also automatically failed. In fact, there is no such
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finding of the learned Judge in this regard. For each of these claims, points

for determination were framed by the Arbitral Tribunal and answered in

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the affirmative.
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18. The reliance placed by Mr Bhatt on paragraph 65 of the Award to

contend that all the claims were interlinked, is wholly misconceived. The

Arbitral Tribunal framed in all, 22 points for determination. Paragraph 65

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of the Award deals with Point Nos.1 & 2 (I to VII). Point No.1 as framed

by the Arbitral Tribunal (on page 75 of the paper-book) was whether the

Claimant (Appellant before us) proved that it encountered various

difficulties in completing the project work as per schedule/within the time

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specified due to various hindrances, and whether as per the contract, it was

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the obligation of the Respondent to remove the said hindrances, which the

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Respondent failed to discharge. This point was answered in the affirmative

and in favour of the Appellant. Similarly, Point No.2 was whether the

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Claimant proved that the contract work could not be completed in the

scheduled time due to the several reasons which were enumerated at I to

VII (page 75 of the paper-book). On perusing the Award we find that these

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two points have nothing to do with claim (d) which was covered under
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Point No.9, and which required the Claimant (Appellant before us) to
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prove that it was entitled to recover Rs.26,97,579/- as costs for keeping the

bank guarantee alive beyond the period required under the contract. We are
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therefore of the view that the reliance placed by Mr. Bhatt on paragraph 65
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of the Award to contend that all the claims were interlinked/intertwined is

wholly misconceived. We do not find any substance in the argument of Mr

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Bhatt that the claims before the Arbitral Tribunal were so intertwined that

on the failure of one claim (claim (d) in the present case), the entire Award
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was liable to be set aside. It would be important to note here, that in both

the impugned orders, there is no finding by the learned Judge that since

claim (d), or for that matter claim (g), were so intertwined with the other

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claims, that failure of these two claims resulted in a failure of all the other

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claims also.

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19. On the issue of severability, the law is now quite well settled. The

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reliance placed by Mr Jagtiani on the judgment of the Full Bench of this

Court in the case of R.S. Jiwani v/s Ircon International Ltd.1 (supra) is

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well founded. Paragraphs 36 to 38 of the judgment, and which are material

for our purpose, read as under :-

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“36. We may now revert back to the facts of the present case which it-
self is a glaring example of what devastating results can be produced by
accepting the contention which has been raised on behalf of the respon-
dent in the present appeal. Undisputedly claims were adjudicated upon
on merits. Parties led evidence, documentary as well as oral, argued the
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matter before the Arbitrator whereafter the Arbitral Tribunal allowed

some claims of the claimants and rejected all remaining claims of the
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claimants and the counter-claim filed by the company. The claimant was
satisfied with the award. An enforceable right by way of decree accrued
to the claimant in terms of sections 32, 35 and 36 of the Act. The compa-
ny approached this court by filing a petition under section 34 which par-
tially allowed in the sense that out of 15 claims allowed by the Arbitra-
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tor in favour of the claimant, held that other claims were not payable to
the claimants but still did not make any observation that the award in so
far as it rejects the remaining claims and the counterclaim were unsus-
tainable. However, to conclude, the learned Single Judge despite having
upheld the claims in favour of the claimants, set aside the entire award
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in view of the Division Bench judgment in the case of Ms. Pushpa

Mulchandani (supra). Could there be a greater perversity of justice to a
party which has succeeded before the Arbitral Tribunal as well as in the
court of law but still does not get a relief. Is that what is contemplated
and was the purpose of introduction of the Act of 1996. An Act which
was to provide expeditious effective resolution of disputes free of court
interference would merely become ineffective statute. Would not the
canon of civil jurisprudence with the very object of the Arbitration Act,
1 2010 (1) ALL MR 605 : (2010) 1 Bom CR 529 (FB)

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1996 stand undermined by such an approach. The effective and expedi-

tious disposal by recourse to the provisions of the 1996 Act would stand

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completely frustrated if submissions of the respondent are accepted.
Partial challenge to an award is permissible then why not partial setting
aside of an award. In a given case, a party may be satisfied with major

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part of the award but is still entitled to challenge a limited part of the
award. It is obligatory on the court to deal with such a petition under
section 34(1)(2) of the Act. We may further take an example where the
Arbitral Tribunal has allowed more than one claim in favour of the
claimant and one of such claim is barred by time while all others are

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within time and can be lawfully allowed in favour of the claimant. The
court while examining the challenge to the award could easily severe the
time barred claim which is hit by law of limitation. To say that it is
mandatory for the court without exception to set aside an award as a
whole and to restart the arbitral proceeding all over again would be un-

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just, unfair, inequitable and would not in any way meet the ends of jus-
tice. ig
37. The interpretation put forward by the respondents is bound to
cause greater hardship, inconvenience and even injustice to some extent
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to the parties. The process of arbitration even under 1996 Act encum-
bersome process which concludes after considerable lapse of time. To
compel the parties, particularly a party who had succeeded to undergo
the arbitral process all over again does not appear to be in conformity
with the scheme of the Act. The provisions of section 34 are quite pari
y

materia to the provisions of Article 34 of the Model Law except that the
proviso and explanation have been added to section 34(2)(iv). The at-
ba

tempt under the Model Law and the Indian Law appears to circumscribe
the jurisdiction of the court to set aside an award. There is nothing in
the provisions of the Act and for that matter absolutely nothing in the
Model Law which can debar the court from applying the principle of
severability provided it is otherwise called for in the facts and circum-
om

stances of the case and in accordance with law. The courts will not get
into the merits of the dispute. Thus, the interpretation which should be
accepted by the court should be the one which will tilt in favour of the
Model Laws, scheme of the Act and the objects sought to be achieved by
the Act of 1996.
B

38. ……………….. Thus, we proceed to record our answers to the ques-

tions framed as follows :

1. The judicial discretion vested in the court in terms of the provi-

sions of section 34 of the Arbitration and Conciliation Act, 1996
takes within its ambit power to set aside an award partly or
wholly depending on the facts and circumstances of the given
case. In our view, the provisions of section 34 read as a whole

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and in particular section 34(2) do not admit of interpretation

which will divest the court of competent jurisdiction to apply the

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principle of severability to the award of the Arbitral Tribunal, le-
gality of which is questioned before the court. The Legislature
has vested wide discretion in the court to set aside an award

ou
wholly or partly, of course, within the strict limitations stated in
the said provisions. The scheme of the Act, the language of the
provisions and the legislative intent does not support the view
that judicial discretion of the court is intended to be whittled
down by these provisions.

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2. The proviso to section 34(2)(a)(iv) has to be read ejusdem gener-
is to the main section, as in cases falling in that category, there
would be an absolute duty on the court to invoke the principle of
severability where the matter submitted to arbitration can clear-

h
ly be separated from the matters not referred to arbitration and
decision thereupon by the Arbitral Tribunal.”
ig (emphasis supplied)
H
20. The Full Bench of this Court has clearly held that there is nothing in

the provisions of the Act which would debar the Court from applying the
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principle of severability provided it is otherwise called for in the facts and

ba

circumstances of the case, and in accordance with law. The judicial discre-
om

tion vested in the Court in terms of the provisions of section 34 of the Act

takes within its ambit the power to set aside an Arbitral Award partly or

wholly, depending on the facts and circumstances of the given case.

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21. In fact, the reliance placed by Mr. Jagtiani on the judgment of the

Supreme Court in the case of J.G. Engineers Pvt. Ltd. v/s Union of India

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and Anr2 (supra), also clearly lays down that if an Award deals with and

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decides several claims separately and distinctly, and if the Court finds that

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the Award in regard to some of the claims is bad, the Court has the power

to segregate the Award in relation to the claims which do not suffer from

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any infirmity, and uphold it to that extent. Paragraphs 24 and 25 of the said

judgment read thus :-

h
“Re: Question (ii) ig
24. The arbitrator had considered and dealt with Claims 1, 2, 3, 4 and
5, 6, 7 and 8, 9 and 11 separately and distinctly. The High Court found
that the award in regard to Items 1, 3, 5 and 11 was liable to be set
H
aside. The High Court did not find any error in regard to the award on
Claims 2, 4, 6, 7, 8 and 9, but nevertheless chose to set aside the award
in regard to these six items, only on the ground that in the event
Counterclaims 1 to 4 were to be allowed by the arbitrator on
reconsideration, the respondents would have been entitled to adjust the
y

amounts awarded in regard to Claims 2, 4, 6, 7, 8 and 9 towards the

amounts that may be awarded in respect of Counterclaims 1 to 4; and
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that as the award on Counterclaims 1 to 4 was set aside by it and

remanded for fresh decision, the award in regard to Claims 2, 4, 6, 7, 8
and 9 was also liable to be set aside.

25. It is now well settled that if an award deals with and decides several
om

claims separately and distinctly, even if the court finds that the award in
regard to some items is bad, the court will segregate the award on items
which did not suffer from any infirmity and uphold the award to that
extent. As the award on Items 2, 4, 6, 7, 8 and 9 was upheld by the civil
court and as the High Court in appeal did not find any infirmity in
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regard to the award on those claims, the judgment of the High Court
setting aside the award in regard to Claims 2, 4, 6, 7, 8 and 9 of the
appellant, cannot be sustained. The judgment to that extent is liable to
be set aside and the award has to be upheld in regard to Claims 2, 4, 6,
7, 8 and 9.”
(emphasis supplied)

2 (2011) 5 SCC 758

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22. It is therefore now well settled that the judicial discretion vested in

the Court in terms of the provisions of section 34 of the Act takes within its

ou
ambit the power to set aside an Award partly or wholly depending on the

facts and circumstances of the given case. There is nothing in the

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provisions of the Act which would debar the Court from applying the

principle of severability provided it is otherwise called for in the facts and

h
circumstances of the case. To be fair to Mr. Bhatt, he did not dispute the
ig
aforesaid proposition.
H
23. In the present case, we have no doubt that claims (a), (b), (c) and (g)
y

were distinct and independent claims from claim (d). We are therefore of
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the view that the entire Arbitral Award could not have been set aside

merely on the ground that claim (d) was not arbitrable. We find that the
om

learned Single Judge was in error in following this procedure. He ought to

have examined each individual claim separately and come to a finding as

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to which claim could be upheld and which claim ought to have been

disallowed. Admittedly, this exercise was not undertaken. We are therefore

of the view that the impugned orders ought to be set aside and the matter

be remanded back to the learned Single Judge for consideration afresh.

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24. Having held so, the only question that now needs to be answered is

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to the extent of the remand. Mr Jagtiani submitted that the matter ought to

be remanded back with reference to all claims including claims (d) and (g).

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On the other hand, Mr Bhatt submitted that the learned Judge having

already given detailed reasons in the impugned orders for disallowing

h
claim (d) as well as claim (g), the remand ought to be only with reference

to claims (a), (b) and (c).

ig
H
25. As far as claim (g) is concerned, we have no hesitation in holding

that the same also ought to be remanded back alongwith claims (a), (b) and
y

(c). We have come to this conclusion as we find that the incorporation of

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the reasons given for setting aside claim (g) was in the 2 nd impugned order
om

which was passed on an application for “speaking to the minutes of the

order”. In this regard, we fully agree with the ratio of the judgment of the

Gujarat High Court in the case of Kotak Mahindra Bank Ltd. Vs. Official
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Liquidator of M/s. Gujarat BD Luggage Ltd. & Ors 3 (supra). Before the

Gujarat High Court, the Appellant therein had challenged the order passed

by the learned Single Judge on an application for speaking to the minutes.

3 2012 SCC Online Guj 4339

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Whilst disposing of the said application, the learned Single Judge passed a

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detailed order and issued further directions. Being aggrieved thereby,

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Kotak Mahindra Bank Ltd. (the Appellant therein) approached the Division

Bench. In this background, the Gujarat High Court held that once a

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judgment / order is pronounced and if any party wants any correction in the

original order on account of a typographical or clerical mistake, such a

party can apply to the Court for correction. The Gujarat High Court further

h
held that after dictating the judgment / order, if any mistake on factual
ig
aspects has crept in while transcribing the same, those also can be
H
corrected on an application for “speaking to the minutes of the order”. So

also, if any argument of either side is missed in the original order, then
y

also, on such application, the concerned Court can modify the original
ba

order to give complete effect to it. However, an application for “speaking

to the minutes of the order” cannot be considered at par with a review

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application or even in a given case, with an application for clarification /

modification of the order. Paragraph 7 of the said judgment reads thus :-

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“7. We have heard learned Counsel for the parties at length and we
have also gone through the order of the learned Single Judge passed
below the note for speaking to minutes. It is required to be noted that
once, a judgment/order is pronounced and if, any party to the same
wants any rectification of any typographical or clerical mistake
regarding date or number, such a party may apply to the concerned
Court for correcting such an error in the judgment/order. After dictating
a judgment/order, if any, mistake on factual aspect has crept in while
transcribing the same, same can be corrected by way of filing a note for

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speaking to minutes, by either-side. If argument of either side is missed

in the order, then also, on such a note, the concerned Court can add

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such argument in the original order to give complete effect to it.
However, a note for speaking to minutes cannot be considered at par
with a review application or in a given case with an application for

ou
clarification/modification of an order. A note for speaking to minutes
can never be considered to be an application of such a nature. Such a
note is, therefore, not even given any number by the Registry. A note for
speaking to minutes is, required to be entertained only for the limited
purpose of correcting a typographical error or an error through

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oversight, which may have crept in while transcribing the same. The
present note for speaking to minutes was filed only for the limited
purpose of drawing the attention of the Court to a particular mistake
and the scope of deciding such a note was, therefore, extremely limited.
Surely, while deciding such a note, there is no/scope for modifying the

h
original order or to give further direction in connection with the earlier
order and as such the original foundation of the order cannot be
ig
changed by passing a subsequent order below note for speaking to
minutes.
H
In the instant case, while passing the impugned order, the learned Single
Judge has given further directions, and thereby, has virtually modified
the original order. Such a course was not open to the learned Single
Judge, while deciding a note for speaking to minutes. When a note for
speaking to minutes is filed, it is not required to be argued, as if the
y

Court is deciding the main issue and no judgment is required to be given

below such a note. Since, the learned Single Judge has traveled beyond
his jurisdiction in regard to the scope of deciding a note for speaking to
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minutes, we have no option but to set aside the impugned order. It is

noteworthy that while admitting the present appeal, the earlier division
bench of this Court stayed the impugned order, observing that the
directions given by the learned Single Judge in the impugned order are
om

contrary to the provisions of Section-529(A) and Section-530 of the

Companies Act, 1956. As stated above, while deciding a note for
speaking to minutes, there is no scope of giving any further direction in
the matter.”
(emphasis supplied)
B

26. In the present case, on perusal of the 2 nd impugned order, we find

that the same could never have been passed on an application for

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“speaking to the minutes of the order”. It was not as if due to any

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inadvertence or oversight, the reasons given in the 2nd impugned order were

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missed out in the original order (1st impugned order). The 2nd impugned

order also does not proceed on that basis.

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27. Mr Bhatt however submitted that the same arguments that were

h
advanced in relation to claim (d) were also canvassed in relation to claim
ig
(g). Since these arguments [with reference to claim (g)] were not recorded

in the 1st impugned order, an application for “speaking to the minutes of

H
the order” was made before the learned Single Judge. We are not in a

position to accept this contention. Despite the statement of Mr Bhatt, the

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2nd impugned order does not record the same. The 2 nd impugned order does
ba

not proceed on the basis that arguments with reference to claim (g) had in

fact been advanced, but the same had not been incorporated in the original
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order due to any oversight. The 2nd impugned order in fact independently

records the satisfaction of the learned Judge that claim (g), like claim (d),
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was also not notified, and therefore, for the reasons that have been given in

relation to claim (d), the Arbitral Tribunal ought not to have awarded claim

(g) also. To our mind, such an order could never have been passed on an

application for “speaking to the minutes of the order”. As held by the

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Gujarat High Court, and in our view rightly, an application for “speaking

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to the minutes of the order” is required to be entertained only for the

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limited purpose of correcting a typographical error or an error through

oversight, which may have crept in while transcribing the original order.

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Therefore, as far as claim (g) is concerned, the 2 nd impugned order cannot

stand and has to be set aside, and claim (g) will also have to be remanded

back to the learned Single Judge for consideration afresh.

h
ig
28. This brings us to the question whether the Arbitration Petition ought
H
to be remanded back also with reference to claim (d). It is true that the

learned Single Judge has given detailed reasons for setting aside the Award
y

in relation to claim (d) by holding that the same was not arbitrable. It is
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also true that the arguments advanced before us by Mr Jagtiani were not

canvassed before the learned Single Judge. However, on hearing

om

Mr Jagtiani, at least prima facie, we find force in the arguments advanced

by him in relation to claim (d). However, instead of expressing any final

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opinion on this issue, we think that it would be in the fitness of things if the

challenge to claim (d) is also considered afresh by the learned Single

Judge. This is more so since we have already held that the challenge to

claims (a), (b), (c) and (g) ought to be remanded back to the learned Single

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Judge for fresh consideration. We therefore think that interest of justice

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would be served even if the challenge to claim (d) is remanded back to the

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learned Single Judge for consideration afresh.

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29. For all the aforesaid reasons, we allow the Appeal and set aside the

orders dated 9th November, 2006 and 21st December, 2006 and direct that

h
Arbitration Petition No.408 of 2005 be restored to file of the learned Single
ig
Judge and be heard afresh. It is clarified that we have not expressed any

opinion on the merits of the matter and the learned Single Judge shall
H
decide the challenge to the Arbitral Award on is own merits and in

accordance with law without being influenced by any observations made in

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this judgment. The Appeal is allowed in the aforesaid terms. In the facts
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and circumstances of the case, there shall be no order as to costs.

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CHIEF JUSTICE
B

B.P. COLABAWALLA, J.

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