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1987 DIGILAW 103 (BOM)

Maharashtra State Electricity Board v. M. L. Bajaj & Company

1987-03-10

H.SURESH

body1987
JUDGMENT - Suresh H., J.: - This petition has been filed by the petitioners for a declaration that there is no agreement dated 23-5-1980 and consequently there is no agreement for arbitration and that, therefore, the arbitrator would have no jurisdiction to entertain any dispute under the agreement. 2. The brief facts which are relevant are as follows: 3. Sometime in September 1979, the petitioners invited tenders for the work of construction of staff quarters at Koradi Thermal Power Station. According to the petitioners, the sealed tenders for this work were to be submitted in the prescribed form which was modified by an errata prepared by the petitioners on 28th September, 1979 and annexed to the tender forms. The controversy centres around this errata. According to the respondents, when they submitted their tender, they had not received the said errata and, therefore, they contend that there was no such errata at all. The tender submitted by the respondents was accepted and the work was entrusted to the respondents. Later on, when the respondents submitted their bills the petitioners paid all the bills, but would not accept the labour price bills as according to them, those could not be the correct bills at all, inasmuch as they were all prepared without taking into account the said errata. 4. It appears that since the petitioners were not accepting the bills and they were not prepared to go for arbitration, the respondents were advised to file a suit under section 20 of the Arbitration Act in the Court of Civil Judge (Senior Division), Nagpur. Accordingly, they filed a Special Civil Suit No. 320 of 1985 in the said Court sometime in the month of November, 1985. 5. During the pendency of the said proceedings, the parties met and certain negotiations took place in a meeting held on 9th December, 1985. The parties agreed to refer the dispute to one Mr. A.K. Shenolikar, Chief Engineer, Irrigation Department, as the sole Arbitrator. After this was agreed upon, the respondents withdrew the said suit filed in the said Court. 6. Thereafter, the arbitrator entered upon the reference and held certain meetings. The parties agreed to refer the dispute to one Mr. A.K. Shenolikar, Chief Engineer, Irrigation Department, as the sole Arbitrator. After this was agreed upon, the respondents withdrew the said suit filed in the said Court. 6. Thereafter, the arbitrator entered upon the reference and held certain meetings. In the fifth sitting of the arbitration meeting held on 15th September, 1986, the petitioners raised the question as to the jurisdiction of the learned arbitrator on the basis with regard to the errata and as to its existence, the parties were not ad idem and, therefore, it was contended that there was no arbitration agreement at all and that, therefore, the arbitrator had no jurisdiction to proceed with the arbitrations. It appears that after hearing the parties finally, the arbitrator directed that the parties should move the Court and obtain necessary orders. It is under these circumstances, the petitioners have filed the present petition on or about 14th January, 1987. 7. At the hearing of this petition, the respondents contended at the outset that this Court has no jurisdiction to entertain and try this petition. They submitted that the respondents had earlier filed their suit under section 20 of the Arbitration Act in the Nagpur Court and even though the said suit was not pending, having regard to the provisions of section 31, sub-section (4) of the Arbitration Act, that Court alone would have jurisdiction to entertain this petition and not any other Court. Here I must mention that both the parties agree that but for this contention, both the courts were otherwise competent to entertain any petition in the matter of reference which is pending before the arbitrator. 8. Section 31, sub-section (4), is as follows: "Notwithstanding anything contained elsewhere in this Act or in any law for the time being in force, where in any reference any application under this Act has been made in a Court competent to entertain it, that Court alone shall have jurisdiction over the arbitration proceedings and all subsequent applications arising out of that reference and the arbitration proceedings shall be made in that Court and in no other Court." Therefore, the question is whether it could be said that any application had been made under the Arbitration Act in any reference in the Nagpur Court and if so, this Court will have no jurisdiction to entertain the present petition. 9. 9. Section 31, sub-section (4), has been constructed by the Supreme Court. My attention has been drawn, firstly, to the Case of (Kumbha Mawji v. Dominion of India)1, A.I.R. 1953 S.C. 313. In this Case, the Supreme Court considered the scheme of section 31, sub-sections (1) to (4) and emphasised the need" for clothing a Single Court with effective and exclusive jurisdiction, and to bring about by the combined operation of these three provisions the avoidance of conflict and scramble," whether the question arises during the pendency of the arbitration or after the arbitration is completed or before the arbitration is commenced. As far as section 31, sub-section (4), the Court said this:" Then comes sub-section (4), the object of which apparently is to go further than sub-section (3), that is, not merely casting on the party concerned an obligation to the all applications in one Court but vesting exclusive jurisdiction for such applications in the Court in which the first application has been already made." The Court then negatived the contention that the phrase "in a reference" as contained in section 31, sub-section (4), must mean "in the course of a reference." It gave a wider meaning to the said phrase as follows: "In the context of section 31, sub-section (4), it is reasonable to think that the phrase "in any reference" means "in the matter of a reference." The word "reference" having been defined in the Act as "reference to arbitration," the phrase "in a reference" would mean "in the matter of a reference to arbitration." The phrase "in a reference" is, therefore, comprehensive enough to cover also an application first made after the arbitration in completed and a final award is made, and in our opinion that is the correct construction thereof in the context." Therefore, section 31, sub-section (4) of the Act would vest exclusive jurisdiction in the Court in which any application in the matter of reference had been made, whether the said application was pending or not at the time when subsequent proceedings are instituted. 10. This was further explained by the Supreme Court in the Case of (The Union of India v. Surjeet Singh)2, A.I.R. 1970 S.C. 189. In this, it is clearly held that an application under section 34 is not an application in a reference. 10. This was further explained by the Supreme Court in the Case of (The Union of India v. Surjeet Singh)2, A.I.R. 1970 S.C. 189. In this, it is clearly held that an application under section 34 is not an application in a reference. However, there are certain observations regarding various sections under which an application can be made before a reference has been made. They are by way of obiter dicta, but are as follows: "There are different sections in the Arbitration Act whereby an application is to be made even before any reference has been made. Section 8 for instance, provides for an application to invoke the power of the Court, when the parties fail to concur in the appointment of an arbitrator to whom the reference can be made. So also section 20 provides for an application to file the arbitration agreement in Court so that an order of reference to an arbitrator can be made. These are clearly applications anterior to the reference but they lead to a reference. Such applications are undoubtedly applications "in the matter of a reference" and may fall within the purview of section 31(4) of the Act even though these applications are made before any reference has taken place." 11. Then came the Case of (Guru Nanak Foundation v. Rattan Singh Sons)3, A.I.R. 1981 S.C. 2075. This was a case where during the pendency of a reference before the arbitrator, a petition was filed in the Delhi High Court seeking certain directions purporting to be under sections 5 and 11 of the Arbitration Act for the removal of the Arbitrator. This petition was not granted . The appellants then moved a special leave petition in the Supreme Court. This special leave to appeal was granted and thereafter the petition was heard by a three Judge Bench of the Supreme Court. During the hearing, by consent of the parties, the earlier arbitrator was removed and another arbitrator was appointed as the sole arbitrator to settle the disputes between the parties. Usual directions were given for the making of the award. Thereafter, when the arbitrator made the award and he wanted to file the award in the Supreme Court an officer of the Supreme Court advised the arbitrator to file the award in the Delhi High Court without obtaining any directions from the Supreme Court in that behalf. Usual directions were given for the making of the award. Thereafter, when the arbitrator made the award and he wanted to file the award in the Supreme Court an officer of the Supreme Court advised the arbitrator to file the award in the Delhi High Court without obtaining any directions from the Supreme Court in that behalf. The arbitrator then filed the award in the Delhi High Court and the parties were informed accordingly. Thereafter a petition was filed in the Supreme Court seeking a declaration that the award ought to have been filed in the Supreme Court and for a direction that the award be collected from the Delhi High Court and be filed in the Supreme Court. This petition was granted and in the course of the judgment there are certain observations. 12. At the outset, the Court expressed its disress over the procedural legal wrangle, but in its wisdom, apparently adopted the doctrine of certainty of judicial control over arbitration proceedings by the Court that referred the matter for arbitration, rather than relying on previous proceedings in the matter of reference in another Court. It found support from an earlier decision, being the case of (M/s. Saith Skelton (P) Ltd.)4, A.I.R. 1972 S.C 1507. In a similar situation, earlier, in that case, the Supreme Court had asserted and stated as follows : "The direction in the order dated January 29, 1971, is that the arbitrator is "to make his award". Surely the law contemplates further steps to be taken after the award has been made, and quite naturally the forum for taking the further action is only this Court. There was also direction to the effect that the parties are at liberty to apply for extension of time for making the award. In the absence of any other Court having been invested with such jurisdiction by the order, the only conclusion that is possible is that such a request must be made only to the Court which passed that order, namely this Court." Thereafter, after considering Kumbha Mawji and Surjeet Singh the Court observed as follows: "The Court took notice of various sections under which an application can be made before a reference has been made. Therefore, the decision in Kumbha Mawji's case would not mean that a proceeding earlier to the reference in a Court would clothe that Court with such jurisdiction as to render the provision contained in section 31(4) otiose." In other words, what the Supreme Court meant was, to construe every application to any Court preceding a reference as to a affording jurisdiction to that Court only, would render section 31, sub-section (4) wholly redundant. 13. Therefore, the outcome of these authorities and my own reading of the law, assisted as it has been by Counsel on either side, must lead me to the conclusion that in the absence of any proceedings in the matter of reference in the past or in the presents in any other Court, section 31, sub-section (4) of the Act will have no application. In the case of past proceedings, the question is whether those proceedings led to any reference or not. Even if there was any earlier reference, but the award was made from a reference from another Court, it is the latter Court that has jurisdiction and not the former. The ultimate test is one of judicial control. When the Supreme Court ignored the earlier reference and asserted itself as the Court that referred the matter, it was on the basis that the award must come to it. In the present case, when the respondents filed there suit under section 20 of the Arbitration Act, it did not lead to any reference as such. The suit was withdrawn. The reference was wholly outside the Court. Hence there is no question of anyone going back to that Court as contemplated under section 31, sub-section (4) of the Act. 14. In the view that I have taken this Court has jurisdiction to entertain the present petition as in my view section 31, sub-section (4) of the said Act will have no application. 15. This takes me to the other contention as to whether it can be said there was in fact agreement between the parties. On one side, the contention is that the errata was in fact annexed to the tender, as according to the petitioners other tenderers had taken into account the said errata and submitted their tenders accordingly. 15. This takes me to the other contention as to whether it can be said there was in fact agreement between the parties. On one side, the contention is that the errata was in fact annexed to the tender, as according to the petitioners other tenderers had taken into account the said errata and submitted their tenders accordingly. On the other hand, the contention of the respondents is that there was in fact, no such errata and, therefore, when they submitted their tender and the petitioners had accepted the same it was on the basis that there was no such errata at all. Mr. Mehta appearing for the petitioners indicated the difference with the errata and without the errata. With the errata, the labour price could be approximately about Rs. 5 lakhs and without the errata the labour price could be about Rs. 105 lakhs. However, I need not decide this question, as after some discussions, both the parties have agreed that they would be at liberty to contend their respective contentions before the arbitrator. And it is further agreed that it is open to the arbitrator to accept the case of either of the two and decide accordingly. However, in the event, he is unable to accept the case of either of them and in the event he comes to the conclusion that there was some mistake on either said, in that event he should be able to decide the matter on the basis of quantum meruit. 16. Since the parties have agreed on the manner of approach in the matter of reference before the arbitrator, this petition, of course, must necessarily fail. I, therefore, pass the following order. 17. Subject to the above agreement as recorded in the judgement, the petition stands dismissed. Arbitrator to proceed further with the arbitration. There will be no order as to costs. Petition dismissed.