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2004 DIGILAW 287 (SC)

SECUR INDUSTRIES LTD. v. GODREJ & BOYCE MFG. CO. LTD.

2004-02-26

P.VENKATARAMA REDDI, RUMA PAL

body2004
JUDGMENT RUMA PAL, J.- Leave granted. 2. This appeal has been preferred from an interim order granted by the Division Bench of the Bombay High Court staying the arbitration proceedings before the Uttar Pradesh Industry Facilitation Council (referred to as "the Council") set up under the Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings Act, 1993 (referred to as "the Act"). 3. We are not concerned with the merits of the proceedings initiated by the appellant before the Council. The only question is whether the High Court had the jurisdiction to pass the impugned order. 4. The chronology of events which are relevant for the purposes of this appeal, commenced with a notice dated 11-9-2001 served by the appellant on the respondent raising a demand. The notice also contained the following paragraph"You may also treat this as a notice under the provisions of the Interest on Delayed Payments to Small Scale and Ancillary Industrial Undertakings Act, 1993. Failure or non-payment will force us to move our claims as mentioned above to the appropriate authorities for recovery of our dues as mentioned above." 5. In October 2001 the appellants filed a claim petition before the Council. The Council forwarded the claim petition to Respondent 1 under cover of its letter dated 27-12-2001 asking Respondent 1 to respond to the same within a period of one month. The receipt of the claim petition was acknowledged by the respondent by letter dated 25-1-2002 and requested for time to submit its reply by six weeks. The prayer for extension of time was, however, made without prejudice to the respondents "legal rights and contentions relating to the impugned notice dated 27th December and the claim purported to be made under Section 6 of the said Act". 6. On 12-2-2002 Respondent 1 filed a suit in the City Civil Court at Bombay against the appellant who was named as Defendant 1 and the Council which was named as Defendant 2. The prayers in the plaint were, inter alia, for a declaration that the claim petition filed by the appellant before the Council was ultra vires the provisions of the Act and, therefore, illegal, null and void. A permanent order of injunction was also asked for restraining further proceedings before the Council. An application was filed in the suit for interim relief by Respondent 1. A permanent order of injunction was also asked for restraining further proceedings before the Council. An application was filed in the suit for interim relief by Respondent 1. By an order dated 5-2-2002 the City Civil Court granted an ad interim injunction staying the proceedings under the Act. The application for interim relief was, however, ultimately dismissed by the City Civil Court on 28-11-2002 principally on the ground that the claim had been filed by the appellant under Section 6(2) of the Act read with Section 8(1) of the Arbitration and Conciliation Act, 1996 (which we will refer to as the 1996 Act) and in view of Section 5 of the 1996 Act no court could intervene in arbitration proceedings except tothe extent prescribed under the 1996 Act. According to the City Civil Court, the reliefs claimed for Respondent 1 in its suit did not fall within the ambit of those situations where interference by court was permissible and consequently, the court had no jurisdiction to stay the proceedings before the Council. 7. Respondent 1 preferred an appeal from the decision of the City Civil Court before the High Court. The appeal is pending. On an application for interim relief filed by Respondent 1 pending the appeal, the High Court by its order dated 21-1-2003 stayed the proceedings before the Council only on the ground that no notice had been served by the appellant on Respondent 1 under Section 21 of the 1996 Act. The High Court rejected the appellants application for expediting the appeal on .2-5-2003. Both these orders of the High Court are questioned before us in these appeals. 8. Section 6 of the Act provides as follows: "6. Recovery of amount due.-(1) The amount due from a buyer, together with the amount of interest calculated in accordance with the provisions of Sections 4 and 5, shall be recoverable by the supplier from the buyer by way of a suit or other proceeding under any law for the time being In force . Recovery of amount due.-(1) The amount due from a buyer, together with the amount of interest calculated in accordance with the provisions of Sections 4 and 5, shall be recoverable by the supplier from the buyer by way of a suit or other proceeding under any law for the time being In force . (2) Notwithstanding anything contained in sub-section (1), any party to a dIspute may make a reference to the Industry Facilitation Council for acting as an arbitrator or conciliator in respect of the matters referred to in that sub-section and the provisions of the Arbitration and Conciliation Act, 1996 (26 of 1996) shall apply to such dispute as if the arbitration or conciliation were pursuant to an arbitration agreement referred to in subsection (1) of Section 7 of that Act." 9. Sub-section (2) of Section 6 expressly incorporates the provisions of the 1996 Act. Apart from such express incorporation, sub-section (2) of Section 6 goes further and creates a legal fiction whereby disputes referred are to be deemed to have been made pursuant to an arbitration agreement as fue 1996 Act which say: "2. (4) This Part except sub-section (1) of Section 40, Sections 41 and 43 shall apply to every arbitration under any other enactment for the time being in force, as if the arbitration were pursuant to an arbitration agreement and as if that other enactment were an arbitration agreement, except insofar as the provisions of this Part are inconsistent with that other enactment or with any rules made thereunder. (5) Subject to the provisions of sub-section (4), and save insofar as is otherwise provided by any law for the time being in force or in any agreement in force between India and any other country or countries, this Part shall apply to all arbitrations and to all proceedings relating thereto." (emphasis added) 11. The "Part" referred to in this sub-section is Part I of the 1996 Act which deals with domestic arbitrations. The proceedings before the Council, therefore, are proceedings under the 1996 Act, pursuant to a deemed agreement between the parties to the dispute. With the applicability of Part I of the 1996 Act in all its force, the extent of judicial intervention in arbitrations is limited by the non obstante provisions of Section 5 of the 1996 Act, which stipulate "5. With the applicability of Part I of the 1996 Act in all its force, the extent of judicial intervention in arbitrations is limited by the non obstante provisions of Section 5 of the 1996 Act, which stipulate "5. Notwithstanding anything contained in any other law for the time being in force, in matters governed by this Part, no judicial authority shall intervene except where so provided in this Part." The City Civil Court was right in its approach when it said that the court 9 could only intervene in respect of matters expressly provided for in the 1996 Act. The validity of the proceedings before the arbitral tribunal is an issue which the Council, and not the court, could decide under Section 16 of the 1996 Act. Sub-section (1) of Section 16 opens with the words "the arbitral tribunal may rule on its jurisdiction ..."It has been held by this Court that the arbitral tribunals authority under Section 16 is not confined to the width of its jurisdiction but goes to the very root of its jurisdiction. [Konkan Rly.