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2000 DIGILAW 683 (BOM)

Chief Engineer, Western Zone-II Central Public Works Department & others v. Pandit s/o Shankarrao Kulkarni

2000-09-16

B.H.MARLAPALLE, D.S.ZOTING

body2000
JUDGMENT - B.H. MARLAPALLE, J.:---Heard learned Counsel for the respective parties. 2. Rule. 3. Respondents waive service. Rule taken up for final hearing forthwith by consent of parties. 4. This petition assails the order passed by the learned Single Judge as a Judge designated by the learned Chief Justice under section 11(6) of the Arbitration and Conciliation Act , 1996 (hereinafter referred to as "the Act" for short) in Miscellaneous Civil Application No. 8 of 1999. 5. On 2-11-1994 an agreement was signed between the Executive Engineer, Central Public Works Division and the respondent for carrying out construction of "C/O CTC-III for C.R.P.F. at Mudkhed and SH : C/O II Nos type III Quarters, and one number stilt and two numbers type IV quarters I/C internal W/S-SI and drainage". Accordingly, work order came to be issued for a contractual value of Rs. 35,22,925/- and it was to be carried out within a period of 13 months i.e. by 31-12-1995. The contractor failed to maintain this deadline and the respondent completed the work on 3-7-1996 as per the completion certificate but the work was found to be defective. Even though the buildings were handed over to the Central Reserve Police Force on 1-4-1998 and 4-7-1998, they were not found to be useful and another agency was employed to rectify the defects. Consequently, on 12-4-1999 the petitioner issued notice to the respondent contractor informing him that inspite of reminders he failed to rectify those defects in the contractual work and, therefore, an amount of Rs. 6,83,105/- would be deducted. The respondent applied for final bill on 26th May 1999 and a copy of the said bill was issued to him on the same day. On 16-7-1999, the respondent approached the petitioner No. 1 for appointment of an Arbitrator as per Clause No. 25 of the agreement. Consequent to the notice dated 12-4-1999 for deduction of Rs. 6,83,105/- the petitioner No. 1 called upon the respondent to submit documentary evidence in support of his claim. It is alleged that without complying with these requirements the respondent approached this Court on 25-8-1999 and filed Miscellaneous Civil Application No. 8 of 1999 praying for appointment of arbitrator. Consequent to the notice dated 12-4-1999 for deduction of Rs. 6,83,105/- the petitioner No. 1 called upon the respondent to submit documentary evidence in support of his claim. It is alleged that without complying with these requirements the respondent approached this Court on 25-8-1999 and filed Miscellaneous Civil Application No. 8 of 1999 praying for appointment of arbitrator. The petitioners filed reply opposing the application and it was stated that the petitioner No. 1 had already appointed an arbitrator on 7-10-1999 and the said arbitrator was from the Urban Development Department of the Government of India with his office at Mumbai, resultantly the Miscellaneous application filed by the respondent did not survive. However, by the impugned order dated 25-2-2000 the learned Single Judge of this Court allowed the application, declared the appointment of arbitrator by petitioner No. 1 vide his order dated 7-10-1999 as null and void and appointed an arbitrator under section 11(6) of the Act. 6. Shri Naik, learned Counsel appearing with Shri K.B. Choudhari for the petitioners, submitted that the order passed by the learned Single Judge as a designatee of the learned Chief Justice is manifestly erroneous and once the petitioner No. 1 had appointed an arbitrator under Clause No. 25 of the agreement, pursuant to the demand made by the respondent, the application filed by him did not survive and the learned Judge failed to apply his mind to this legal position. He also submitted that the reliance of the learned Single Judge on the order of this Court in the case of (Naginbhai C. Patel v. Union of India)1, 1992 (2) Bom.C.R. 189 is erroneous and the order passed by the learned Judge was not only administrative but it was a judicial order inasmuch as, the learned Judge proceeded to observe that the order passed by the petitioner No. 1 appointing an arbitrator on 7-10-1999 was null and void. In support of these contentions, the learned Counsel has relied upon an unreported order passed by the Supreme Court in the case of (Union of India and others v. M/s. Decon India Private Limited)2, Civil Appeal Nos. 2362 and 2363 of 1999 (arising out of S.L.P. (C) Nos. 12102 and 12103 of 1998) dated 19th April 1999. 7. In support of these contentions, the learned Counsel has relied upon an unreported order passed by the Supreme Court in the case of (Union of India and others v. M/s. Decon India Private Limited)2, Civil Appeal Nos. 2362 and 2363 of 1999 (arising out of S.L.P. (C) Nos. 12102 and 12103 of 1998) dated 19th April 1999. 7. On the other hand, Shri Sanjay Gangapurwala, learned Counsel appearing for the respondent stated that during the pendency of this petition, the arbitrator has passed his award on 4-7-2000 and in view of the provisions of section 34 of the Act, the challenge raised by the petitioners in the instant petition need not be gone into more so, when the petitioners have a remedy to challenge the award including the appointment of the arbitrator under the said provisions. He also submitted that the writ petition is not tenable as the order impugned is only an administrative order and entertaining the petition would amount to frustrating the very purpose in framing the Act which was aimed at minimising the scope of judicial interference and delays being caused in the arbitral proceedings. The point of latches has also been raised inasmuch as the impugned order was passed on 25-2-2000, the petitioners have participated in the arbitration proceedings and they have approached this Court by filing the instant petition on 4-5-2000 i.e. after a period of about two and half months and, therefore, the petition not only suffers from latches but the petitioners have acquiesced their right to challenge the order passed by the learned Single Judge. In support of his arguments, the learned Counsel has relied upon the following judgments of the Supreme Court. (1) 1993(1) A.L.R. 469 (Nandyal Co-operative Spinning Mills Limited v. K.V. Mohan Rao)3. (2) A.I.R. 1966 S.C. 91 (Sadhu Singh v. Delhi Administration)4. (3) A.I.R. 1984 S.C. 1072 (M/s. Tarapore Co. v. Cochin Shipyard Ltd. Cochin)5. (4) A.I.R. 1988 S.C. 205 (Prasun Roy v. Calcutta M.D. Authority)6. (5) A.I.R. 1999 S.C. 3246 (Ador Samia Pvt. Ltd. v. Peekay Holdings Ltd. and others)7. He has also relied upon a judgment of this Court in the case of (A.R. Savkur v. Amritlal Kalidas)8, A.I.R. 1954 Bombay 293 and a judgment of the Punjab and Haryana High Court in the case of (M/s. Harike Rice Mills v. State of Punjab)9, 1997 (Suppl.) A.L.R. 342. 8. He has also relied upon a judgment of this Court in the case of (A.R. Savkur v. Amritlal Kalidas)8, A.I.R. 1954 Bombay 293 and a judgment of the Punjab and Haryana High Court in the case of (M/s. Harike Rice Mills v. State of Punjab)9, 1997 (Suppl.) A.L.R. 342. 8. In the case of Ador Samia (supra), the Supreme Court held that the order passed by the learned Chief Justice under section 11(6) of the Act, being an administrative in nature, cannot be subjected to any challenge directly under Article 136 of the Constitution of India and only on this ground, without expressing any opinion on the merits of the controversy between the parties, the Special Leave Petition was disposed of as not maintainable. The Supreme Court clarified further that whatever other remedy was available to the petitioners for challenging the order passed by the learned Single Judge would obviously remain untouched. In the case of Naginbhai C. Patel (supra) the learned Single Judge of this Court observed : "The purported appointment made by the appointing authority during the pendency of this application is no appointment in the eye of law. It is non est. In view of the facts and circumstances set out above, in the instant case, it is the Chief Judge or the person designated by him to make the appointment having due regard for considerations likely to secure the appointment of an independent and impartial arbitrator." This decision was, per se, relied upon by the learned Single Judge of this Court while passing the impugned order. 9. We are, therefore, required to decide the issues namely : (a) whether the order passed under section 11(6) of the Act is subject to judicial review, (b) whether such an order can be brought in question in a writ petition under Articles 226 and 227 of the Constitution of India, (c) does the application filed under section 11(6) survive once appointment as arbitrator during pendency of such application, and (d) whether the appointment made by the competent authority pursuant to the contractual terms during the pendency of an application filed under section 11(6) of the Act is null and void. 10. It is now well settled by a catena of decisions of the Apex Court that the order passed appointing an arbitrator under section 11(6) of the Act is an administrative order. 10. It is now well settled by a catena of decisions of the Apex Court that the order passed appointing an arbitrator under section 11(6) of the Act is an administrative order. The Apex Court in the case of Ador Samia Pvt. Ltd. though held that a Special Leave Petition cannot be entertained against such an administrative order, it would not, per se, imply that such an order cannot be challenged in a writ petition filed under Articles 32 or 226 and 227 of the Constitution of India. Every administrative order passed by a statutory authority is subject to judicial review by this Court and an order passed under section 11(6) of the Act cannot be an exception to this rule. The power of judicial review under Articles 32,226/227 is a basic and essential feature of our Constitution. We may in this regard usefully refer to a recent judgment of the Supreme Court in the case of (L. Chandra Kumar v. Union of India)10, 1997 (3) Bom.C.R. (S.C.)449 and the Apex Court observed as : (1) Broadly speaking, judicial review in India comprises three aspects, namely, judicial review of legislative action, judicial review of judicial decisions and judicial review of administration action; (2) The jurisdiction conferred upon the High Courts under Articles 226/227 and upon the Supreme Court under Article 32 of the Constitution is a part of the inviolable basic structure of our Constitution. While this jurisdiction cannot be ousted, other courts and Tribunals may perform a supplemental role in discharging the powers conferred by Articles 226/227 and 32 of the Constitution; (3) If the power under Article 32 of the Constitution, which has been described as the "heart" and "soul" of the Constitution, can be additionally conferred upon "any other Court", there is no reason why the same situation cannot subsist in respect of the jurisdiction conferred upon the High Courts under Article 226 of the Constitution." 11. In the instant cast the order impugned cannot be held to be merely an administrative, because the learned Single Judge has not only appointed an arbitrator but has also given a declaration that the appointment made by the petitioner No. 1 of an arbitrator vide his order dated 7-10-1999 is null and void. In the instant cast the order impugned cannot be held to be merely an administrative, because the learned Single Judge has not only appointed an arbitrator but has also given a declaration that the appointment made by the petitioner No. 1 of an arbitrator vide his order dated 7-10-1999 is null and void. The order, therefore, carries a judicial pronouncement regarding the status of the order passed by the petitioner No. 1 on 7-10-1999 and in fact the said order has been declared as a nullity in law which implies that the order is quashed and set aside. This writ petition challenges both parts of the impugned order, namely, the appointment of the arbitrator by the learned Single Judge as well as his decision to declare the order dated 7-10-1999 passed by the petitioner No. 1 as nullity in law. We, therefore, have no hesitation to hold that the instant petition is maintainable and the objections taken by the learned Counsel for the respondent relying upon the enunciations mentioned hereinabove cannot be sustained. Our view in this regard is buttressed by the order of the Apex Court in the case of the Union of India and others v. Decon India Pvt. Ltd. (supra). The learned Counsel for the petitioners has submitted before us the entire paper book in S.L.P. Nos. 12102 and 12103 of 1998. In that case also the construction work as per the contract was completed on 10-3-1997 and serious disputes and differences had arisen between the parties which were covered by the arbitration agreement. By letter dated 15-12-1997 the contractor had requested for appointment of arbitrator and by order dated 20-3-1998 the department had appointed an arbitrator in terms of Clause 25 of the agreement. In the meanwhile the contractor had moved an application under section 11 before the High Court at Calcutta on 21-1-1998. By order dated 15-5-1998 the High Court at Calcutta appointed another arbitrator and the said order came to be challenged before the Supreme Court. While disposing the appeals filed by the Union of India against the contractor companies by order dated 19-04-1999, the Supreme Court observed thus : "Keeping in view the facts and circumstances of the case and the fact situation that before the impugned order was passed, the appellant had already appointed an arbitrator in terms of Clause 25 of the agreement, the impugned order cannot be sustained. The same is hereby set aside. The order appointing in terms of Clause 25 of the agreement by the appellant shall continue to act as the arbitrator in the case and shall proceed with reference in accordance with law and dispose of the proceedings expeditiously. The appeals are disposed of accordingly. No costs." 12. Reliance of the respondent on the decision of the Division Bench of this Court (Nagpur Bench) in the case of (Union of India and others v. M/s. Ramdas Construction Company)11, Writ Petition No. 4404 of 1999 is misplaced and the issues involved in this petition did not arise for consideration in that petition. The law laid down by this Court in the case of Naginbhai cannot be held to be a good law any more and, therefore, the impugned order passed by the learned Single Judge relying on the decision in the case of Naginbhai cannot be sustained. 13. We may also observe that the legality of the order passed under section 11(6) of the Act cannot be gone into by the concerned Court in an application under section 34. Though the Act has aimed at expeditious conclusion of the arbitration proceedings, that does not mean that the powers of this Court under Articles 226 and 227 of the Constitution are taken away and the order passed under section 11(6) of the Act is always subject to judicial review in a writ petition under Article 226 and 227 of the Constitution. The mere fact that during the pendency of this petition, the arbitrator has passed his arbitral award on 4-7-2000 would not shut the doors of this Court and the petition, which was filed on 4-5-2000, would not become infructuous. If the arbitrator has acted without an authority in law, the entire arbitral proceedings would stand vitiated. The legality of his appointment order goes to the very root of the matter and such an order is the foundation of the arbitral proceedings. Once such an order is held to be illegal, the entire proceedings must be held to be null and void ab initio. The legality of his appointment order goes to the very root of the matter and such an order is the foundation of the arbitral proceedings. Once such an order is held to be illegal, the entire proceedings must be held to be null and void ab initio. We are not impressed by the submissions of the respondent that the petition suffers from laches or the petitioners have acquiesced their right to challenge the order passed by the learned Single Judge only because the petition was filed after a period of about two and half months and the petitioners had participated in the arbitration proceedings before the arbitrator who was appointed by this Court. 14. In the result, we allow the petition and quash and set aside the order passed in Miscellaneous Civil Application No. 8 of 1999 on 25th February 2000 appointing Shri S.V. Mahurkar, as the sole arbitrator. We hold that the order passed by the petitioner No. 1 on 7-10-1999 appointing an arbitrator cannot be held to be null and void and once that order was passed, Miscellaneous Civil Application No. 8/1999 filed before this Court under section 11(6) of the Act did not survive. We further direct that the Arbitrator appointed by the petitioners No. 1 shall start with the arbitration proceedings de novo and complete them as expeditiously as possible and in any case within a period of three months from the date of first appearance. The parties shall appear before the said arbitrator on or before 26th September 2000. 15. Rule made absolute accordingly without any order as to costs. 16. Parties to act on an ordinary copy of this order duly authenticated by the Court Sheristedar. 17. Mrs. Phadnis, advocate, holding for Shri Gangapurwala, learned counsel for the respondent at this stage submitted an oral application praying for stay of this order for a period of four weeks. The prayer is hereby rejected. Petition allowed. -----