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2008 DIGILAW 1048 (ORI)

UNITED CONSTRUCTION WORKS v. STATE OF ORISSA

2008-11-21

B.P.RAY, I.M.QUDDUSI

body2008
JUDGMENT : B.P. Ray, J. - The Petitioner in this writ application challenges the enactment called the Arbitration (Orissa Amendment) Act, 1989 made by the State of Orissa in violation of the fundamental rights of the Petitioner under Articles 14 and 19 of the Constitution of India being arbitrary, artificial and discriminatory and also being the outcome of colourable exercise of power. 2. The brief facts leading to this application are as follows: Pursuant to the tender call notice for the work of "Construction of spillway and Left Head Regulator of Kuanria Irrigation Project" and acceptance of the tender of the Petitioner, the Petitioner entered into an agreement on 27.3.1981 with the State -Government for execution of the same. On 6.4.1981, the work order was issued by the Executive Engineer, Kuanria Irrigation Division, Daspalla. On July 1983, the Petitioner completed the work within the stipulated time as extended. On 26.3.1983 by way of notification, the State Government amended the Arbitration Act, 1940 in Arbitration (Orissa Amendment) Act 1982 incorporating Section 41-A (1), which provides inter alia: 41-A(1) Notwithstanding anything contained in this Act or in any contract or any other instrument, but without prejudice to the provisions contained in Section 47, in all cases where the State Government, a local or other authority controlled by the State Government, a statutory corporation or a Government Company is a party to the dispute, all references to arbitration shall be made to the Arbitration Tribunal. Xx xx xx All Arbitration proceedings relating to a dispute of the nature specified in Sub-section (1) which are pending before any arbitrator on the date of commencement of the Arbitration (Orissa Amendment) Act, 1982 and in which No. award has been made by the said date, shall stand transferred to and disposed of by the Arbitration Tribunal. On 21.7.1984 the State Government further amended the Arbitration Act, 1940 vide Arbitration (Orissa Amendment) Act 1984. The following proviso was added to Sub-section (l) of the Section 41-A. Xx xx xx Provided that the State Government may by order in writing direct that the arbitration proceedings relating to disputes and claims involving rupees one crore or above, pending before any Arbitrator or Board of Arbitrators on the date of the commencement of the Arbitration (Orissa Amendment) Act, 1982 shall be transferred to any Special Arbitration Tribunal constituted under the proviso to Sub-section (1) for disposal in accordance with law. A copy of the said notification is annexed to the writ application as Annexure-3. On 2.11.1984 the final measurements of the works were done by the Government authorities and payment was made on 22.3.1985 without making any payment for the extra work done. In the year 1985 the Petitioner filed O.S. No. 84 of 1985-1 u/s 20 of the Arbitration Act, 1940 before the Sub-Judge, Bhubaneswar for referring the disputes to Arbitration and appointment of an Arbitrator to decide the claims raised. The Sub Judge by his order dated 21.7.1987 directed the State Government to appoint Arbitrator as per the provision of the Act. According to the Petitioner, when the Petitioner first informed the State Government about his claims in 1985, there was No. provision for the Special Arbitration Tribunal in the Arbitration Act. On 31.10.1987 Mr. Justice G.K.Mishra, retired Chief Justice of Orissa High Court, was appointed as the Presiding Officer of the Special Arbitration Tribunal by the State Government under Sub-section (1) of Section 41-A of the Arbitration Act as amended by the Arbitration (Orissa Amendment) Act, 1984. Thereafter Mr. G.K.Mishra withdrew himself from functioning as the Special Arbitration Tribunal and the State Government by notification dated 23.8.1988 appointed Mr. Justice B.K.Behera, retired Judge of Orissa High Court as the Special Arbitration Tribunal to settle the disputes arising between the Petitioner and the opposite parties. On 5.9.1988 the proceedings were commenced before the Special Arbitration Tribunal. The Special Arbitration Tribunal held 48 sittings. The pleadings were complete. The evidence of both the parties had been recorded and the argument of the Petitioner was over. The opposite parties took time for their arguments and the impugned Amendment Act was brought into force at that stage. Copy of the proceedings before the Special Arbitration Tribunal is annexed to the writ petition as Annexure-6. 3. The Arbitration (Orissa Amendment) Act 1989 was enacted on 25.1.1990, which provides inter alia: ... All arbitration proceedings relating to a dispute of the nature specified in Sub-section (7) and which are pending before any Special Arbitration Tribunal on the date of commencement of the Arbitration (Orissa Amendment) Act, 1989 shall stand transferred to and disposed of by the Arbitration Tribunal. 4. From the order sheet at Sl. All arbitration proceedings relating to a dispute of the nature specified in Sub-section (7) and which are pending before any Special Arbitration Tribunal on the date of commencement of the Arbitration (Orissa Amendment) Act, 1989 shall stand transferred to and disposed of by the Arbitration Tribunal. 4. From the order sheet at Sl. No. 48 dated 27.1.1990 it appears that before the Special Arbitration Tribunal an application was moved for transfer of the case to the Orissa State Arbitration Tribunal in view of the amendments effected to Section 41-A of the Indian Arbitration Act. 5. According to the Petitioner, apart from loss of time in pursuing the proceedings before the Special Tribunal the Petitioner has also suffered financially since the Petitioner has already spent about Rs. 3 lakhs towards cost and expenses of the proceedings including the fees of the Special Tribunal Advocates and incidental expenses. The Petitioner had not inflated the claims to get the matter referred to the Special Tribunal. At the time when the Petitioner raised the claims there was No. Special Tribunal in existence. The Petitioner challenged the vires of the Arbitration (Orissa Amendment) Act, 1989 (Orissa Act 1 of 1990) under Article 32 of the Constitution of India before the Hon'ble Supreme Court of India in Writ Petition (C) No. 263 of 1990. It is pertinent to mention here that several other claimants had also filed their writ petitions and Special leave Petitions before the Hon'ble Supreme Court. The apex Court disposed of the matters analogously on 21.3.1996 and so far as the writ petitions including writ petition No. 263 of 1990 are concerned, the following order was passed. In these petitions under Article 32 of the Constitution, the Petitioners have challenged the Constitutional Validity of Arbitration (Orissa) Amendment Act, 1989 and/or Arbitration (Orissa) Amendment Act, 1982 and Orissa Act 3 of 1983. We are of the view that these matters can more appropriately be dealt with in the petitions under Article 226 of the Constitution of India. We decline to entertain these petitions under Article 32 of the Constitution. We give liberty to the Petitioners to file fresh petitions before the High Court within two months from today. In case, the petitions are filed within two months from today, the same shall not be dismissed on the ground of delay and latches. The petitions are disposed of. We decline to entertain these petitions under Article 32 of the Constitution. We give liberty to the Petitioners to file fresh petitions before the High Court within two months from today. In case, the petitions are filed within two months from today, the same shall not be dismissed on the ground of delay and latches. The petitions are disposed of. The copy of the said order is annexed to the writ petition as Annexure-9. 6. After the aforesaid order was passed, the Petitioner filed this writ petition on several grounds. The submission of the Petitioner is confined to the changed circumstances when the Arbitration Act 1940 has been repealed with the coming into force of the Arbitration and Conciliation Act, 1996. The Arbitration Tribunal which is constituted under the Arbitration Act, 1940, after repeal of the said Act does not have any jurisdiction to adjudicate upon the matters which are not referred to it prior to such repeal and after repeal of the Arbitration Act, 1940, the amendments effected by virtue of Arbitration (Orissa) Amendment Act, 1989 have been rendered invalid. Thus, according to the Petitioner, Arbitration proceedings before the Arbitration Tribunal after coming into force of the Arbitration (Orissa) Amendment Act, 1989 is legally not tenable. On the aforesaid grounds prayer has been made to allow the Arbitrator who was in seisin of the Arbitration proceedings to complete the same within a specified period. 7. A counter affidavit has been filed in the year 1998 by the State Government taking a stand that the apprehension of the Petitioner that on transfer of the case from the file of Special Arbitration Tribunal to Arbitration Tribunal, he will be forced to pay 10% of the claim amount as security deposit is misconceived as the same flows from the contractual obligation between the parties. In the present case the transfer being on account of the operation of law, question of payment of 10% of the claim as security deposit before the Arbitration Tribunal does not arise. 8. The sum and substance of the contention made in the counter affidavit filed by the opposite parties is that there will be No. delay in disposal of the matter before the Arbitration Tribunal. There is No. illegality in making the impugned amendment in the Arbitration Act, 1940. The fact that the arbitration proceeding has reached final stage before the Special Arbitration Tribunal, Mr. There is No. illegality in making the impugned amendment in the Arbitration Act, 1940. The fact that the arbitration proceeding has reached final stage before the Special Arbitration Tribunal, Mr. Justice B.K.Behera, has not been disputed in the counter affidavit. But all those averments have become academic as the Arbitration Act, 1940 has already been repealed by virtue of Section 85 of the Arbitration and Conciliation Act, 1996. 9. Learned Counsel for the Petitioner draws our attention to the decision rendered in the case of G.C. Kanungo and D.C. Routray Vs. State of Orissa. The paragraph 29 of the said decision is quoted below: Thus, the impugned 1991 Amendment Act seeks to nullify the awards made by the Special Arbitration Tribunals constituted under the 1984 Amendment Act, in exercise of the power conferred upon them by that Act itself. When, the awards made under the 1984 Amendment Act by the Special Arbitration Tribunals in exercise of the State Judicial power conferred upon them which cannot be regarded as those merged in, Rules of Court or judgments and decrees of Courts, are sought to be nullified by 1991 Amendment Act, it admits of No. doubt that legislative power of the State Legislature issued by enacting impugned 1991 Amendment Act to nullify or abrogate the awards of the Special Arbitration Tribunals by arrogating to itself, a judicial (see Re. Cauvery Water Disputes Tribunal (1991) (2) Supp. SCR 497: ( AIR 1992 SCW 119 ). From this it follows that the State Legislature by enacting the 1991 Amendment Act has encroached upon the judicial power entrusted to judicial authority resulting in infringement of a basic feature of the Constitution the Rule of Law. Cauvery Water Disputes Tribunal (1991) (2) Supp. SCR 497: ( AIR 1992 SCW 119 ). From this it follows that the State Legislature by enacting the 1991 Amendment Act has encroached upon the judicial power entrusted to judicial authority resulting in infringement of a basic feature of the Constitution the Rule of Law. Thus when the 1991 Amendment Act nullifies the awards of the Special Arbitration Tribunals, made in exercise of the judicial power conferred upon them under the 1984 Amendment Act, by encroaching upon the Judicial power of the State, we have No. option but to declare it as unconstitutional having regard to the well settled and undisputed legal position that a legislature has No. legislative power to render ineffective the earlier judicial decisions by making a law which simply declares the earlier judicial decisions as invalid and not binding, for such powers, if exercised, would not be legislative power exercised by it, but judicial power exercised by it encroaching upon the judicial power of the State vested in a judicial tribunal as the Special Arbitration Tribunal under 1984 Amendment Act. Moreover, where the arbitral awards sought to be nullified under the 1991 Amendment Act are those made by Special Arbitration Tribunals constituted by the State itself under 1984 Amendment Act to decide arbitral disputes to which State was a party, it cannot be permitted to undo such arbitral awards which have gone against it, by having recourse to its legislative power for grant of such permission as could result in allowing the State, if nothing else, abuse of its power of legislation.' 10. Be that as it may, the present position is clarified by the apex Court in the case of Mahipatlal Patel v. Chief Engineer and Anr. (Civil Appeal No. 2350 of 2008) (Arising out of SLP (C) No. 8500 of 2006). Paragraph 6 of the said judgment reads as follows: Having heard the Learned Counsel for the parties and after considering the impugned order rejecting the application for appointment of arbitrator and the provisions u/s 85 of the Act and Clause 50 of the agreement in detail, we are of the view that the order of the High Court is not sustainable in law. An order of the Orissa High Court on the question of existence- of an arbitration tribunal was brought to our notice by the Learned Counsel for the parties from which it clearly appears that the arbitration tribunal created under the Arbitration Act, 1940 does not exist, for deciding the disputes which had arisen out of an agreement entered into after the Arbitration Act, 1940 was repealed. Accordingly, it has been held that the arbitration tribunal set up by the Arbitration Act, 1940 does not exist as on date and the present dispute between the parties cannot be referred to the said tribunal which is not in existence in the eyes of law. It has also been accepted by the Learned Counsel for the parties that against this order of the High Court, No. appeal was filed or steps taken by either of the parties, that is to say, that it has now been accepted that there is No. existence of any arbitration tribunal. On the basis of the aforesaid judgment of the Chief Justice of the High Court, it has been accepted that No. arbitration tribunal is in existence. Therefore, without going into the merits and in view of the aforesaid decision of the Orissa High Court, we are of the view that in the absence of existence of any arbitration tribunal, it is only the High Court to exercise its power u/s 11 of the Act to appoint an arbitrator to go into the disputes and differences between the parties. Accordingly, we set aside the order of the High Court. We now request the High Court to decide the application u/s 11 of the Act on merits. It is expected that the said application shall be decided and dispose of within three months from the date of supply of a copy of this order to it. This appeal is thus allowed to the extent indicated above. There will be No. order as to costs. 11. In view of the aforesaid decision of the apex Court, we have No. hesitation to say that there is No. scope to proceed with the matter before the State Arbitration Tribunal. This appeal is thus allowed to the extent indicated above. There will be No. order as to costs. 11. In view of the aforesaid decision of the apex Court, we have No. hesitation to say that there is No. scope to proceed with the matter before the State Arbitration Tribunal. It is to be seen that the Petitioner is pursuing with the matter since 1985 and it is not disputed by the State that the Arbitration proceeding was about to be completed and 48 sittings were held, the evidence had been recorded as revealed from the order sheets annexed to the writ petition. Copy of the proceeding in Annexure-6 indicates that Mr. Justice B.K.Behera was in seisin of the matter. There is every reason to allow the writ petition and allow Mr. Justice B.K.Behera to proceed with the Arbitration proceeding from the stage where it is. Therefore, we allow the writ petition and direct Mr. Justice B.K.Behera to proceed with the matter and dispose of the same within a period of three months from the date of communication of this order. We also direct the opposite parties to take proper steps to transmit the record from the Orissa Arbitration Tribunal to Mr. Justice B.K.Behera. With the aforesaid observations and directions the writ petition is disposed of. No. order as to costs. I.M. Quddusi, J. 12. I agree.