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2009 DIGILAW 215 (ORI)

Paradeep Phosphates Ltd. v. Paradeep Port Trust

2009-03-17

B.P.DAS, R.N.BISWAL

body2009
Judgment B. P. DAS, J. :- This writ appeal has been filed against the order dated 1-8-2005 passed by n learned single Judge of this Court in W.P.(C) No. 8673/2004. 2. The brief facts, as narrated in the appeal memo, are as follows :- On 3-8-1985, when the present appellant-Paradeep Phosphates Ltd. (PPL) was a Public Sector Undertaking, it entered into an agreement With the respondent-Paradeep Port Trust (PPT), a statutory authority under the Central Government, with regard to berthing facilities in the Paradeep Port, vide Annexure-I. Clause 20 of the said agreement provided for reference of disputes arising thereunder to arbitration. The Central Government constituted a High Power Committee in terms of the judgment of the apex Court rendered in Oil and Natural Gas Commission v. Collector of Central Excise, reported in 1994 (70) ELT 45 , wherein the Court while clarifying its earlier order dated 11-10-1991 directed the Union of India to set up a High Power Committee for the purpose of ensuring that disputes / controversies "between a Ministry and a Ministry of the Government of India, a Ministry and a Public Sector Undertaking of the Government of India and between Public Sector Undertakings themselves are resolved by recourse to the High Power Committee and that time consuming and expensive litigation is avoided". Disputes arose between the PPL and PPT and the High Power Committee so constituted in terms of the aforesaid judgment of the Apex Court referred the same to arbitration. Despite the subsisting arbitration clause in the agreement dated 3-8-1985 (Annexure-1), a fresh agreement was executed between the parties on 10-8-2001, vide Annexure-4, stipulating, inter alia, that (1) the Arbitration Act, 1940 shall not be applicable and (2) the award pronounced by the sole Arbitrator could be appealed before the Law Secretary. Department of Legal Affairs. Ministry of Law & Justice. Government of India. On 19-9-2001, the sole Arbitrator. Sri N.C. Jain, entered into the reference. During pendency of the said arbitration proceedings, the Government of India vide Purchase Agreement dated 28-2-2002 (Annexure-5), divested its major shareholdings in the PPL to a private enterpreneur whereafter the PPL became a private company. The sole Arbitrator, Sri N. C. Jain, passed the award on 27-12-2002, vide Annexure-7. Sri N.C. Jain, entered into the reference. During pendency of the said arbitration proceedings, the Government of India vide Purchase Agreement dated 28-2-2002 (Annexure-5), divested its major shareholdings in the PPL to a private enterpreneur whereafter the PPL became a private company. The sole Arbitrator, Sri N. C. Jain, passed the award on 27-12-2002, vide Annexure-7. According to the appellant-PPL, the respondent-PPT instead of challenging the arbitral award dated 27-12-2002 in an appropriate Court in accordance with Section 34 of the Arbitration & Conciliation Act, 1996, purported to file an appeal in February, 2003 before the Additional Secretary. Department of Legal Affairs. Ministry of Law and Justice, Government of India. The PPL filed its counter to the said appeal raising various questions including the question of maintainability of the appeal and the jurisdiction of the Appellate Authority to entertain such appeal. As indicated in the memo of writ appeal, though both the parties appeared through their respective Advocates, the Appellate Authority by order dated 167-2003 debarred them to take assistance of the advocates. The PPL challenged the aforesaid order before the Delhi High Court in Civil Writ Petition No. 5219/2003 and prayed for quashing the proceedings pending before the said Appellate Authority. The PPL filed Execution Case No. 3/2003 before the learned District Judge. Cuttack, but the same was dismissed by the order dated 30-4-2004 in Annexure-16. Aggrieved by the aforesaid order of the Executing Court, the appellant-PPL filed a writ petition being W.P.(C) No. 8673/2004 in this Court with a prayer to quash and set aside the said order dated 30-4-2004 and direct the Executing Court to dispose of the Execution Case in accordance with law. A learned single Judge of this Court heard and disposed of the aforesaid W.P.(C) No. 8673/ 2004 by order dated 1-8-2005, the material part of which is extracted hereunder :- "...........4. Be that as it may, in view of the fact that an appeal is admittedly pending before the appellate authority, which is in seisin of the matter, this Court restrains itself from delving into the factual background of the case and/or point of law involved. Accordingly, this Writ Petition is disposed of permitting the parties to raise all their claims before the appellate authority. Accordingly, this Writ Petition is disposed of permitting the parties to raise all their claims before the appellate authority. The question of executability of the Award which according to law will merge with the appellate order, after disposal of the appeal, any observation at this juncture will amount to prejudging the issues to be decided by the Appellate Authority. The Writ Petition is accordingly disposed of directing that the findings in the impugned order shall not act as bar .for the parties to raise their respective pleas at subsequent stages." The PPL challenged the aforesaid order of the learned single Judge in this appeal. In the meanwhile, the Delhi High Court allowed C.W.P. No. 5219/2003 filed by the appellant-PPL by order dated 15-9-2004 with a direction to the Appellate Authority to examine the special mechanism in relation to cases where the privatization takes place. 3. The question before this Court is whether the decision of Sri N. C. Jain, the sole Arbitrator, is an award under the provisions of the Arbitration and Conciliation Act and the same is final on executable decree, as it has not been challenged by the PPT under Section 34 of the Arbitration and Conciliation Act. 4. Mr. S. K. Padhi, learned counsel for the respondent-PPT, submitted that both the parties entered into the agreement dated 38-1985 to establish a Captive Berth in Paradeep Port to provide berthing facilities exclusively to the PPL and it was indicated therein that the rates charged can be suitably enhanced at such intervals as would be mutually agreed upon by the parties. Clause 20 of the agreement stipulated that in case of any dispute arising out of and in relation to the agreement, for interpretation of any terms and clauses of the agreement, the matter shall be referred to the arbitration of the Board of Trustees of PPT. The respondent-PPT changed the rates in 1993 with prior approval of the Government of India. Thereafter in the year 2000 a suit was filed by the appellant being T.S. No. 115/ 2000 before the Civil Judge (Jr. Divn.), Kujanga, as there were some disputes regarding levy of enhanced rates by the PPT. On 7-9-2000 the Civil Judge directed that the plaintiff might obtain a clearance from the High Power Committee constituted• by virtue of the ruling of the Apex Court in Oil & Natural Gas Commission (supra). Divn.), Kujanga, as there were some disputes regarding levy of enhanced rates by the PPT. On 7-9-2000 the Civil Judge directed that the plaintiff might obtain a clearance from the High Power Committee constituted• by virtue of the ruling of the Apex Court in Oil & Natural Gas Commission (supra). On 10-8-2001 both the appellant and the respondent entered into the following agreement. "In the event of any dispute or differences relating to the interpretation and application of the provisions of the contracts, such dispute or difference shall be referred by either party to the Arbitration of one of the Arbitrators in the Department of Public Enterprises to be nominated By the Secretary to the Government of India in charge of the Bureau of Public Enterprises. The Arbitration Act, 1940 shall not be applicable to the arbitration under this clause. The award of the Arbitrator shall be binding upon the parties to the dispute, provided however, any party aggrieved by such award may make a further reference for setting aside or revision of the award to the Law Secretary, Department of Legal Affairs, Ministry of Law & Justice, Government of India. Upon such reference the dispute shall be decided by the Law Secretary or the Special Secretary/Additional Secretary when so authorised by the Law Secretary, whose decision shall bind the parties finally and conclusively. The parties to the dispute will share equally the cost of arbitration as intimated by the Arbitrator." According to Mr. Padhi, learned counsel for the respondent, the agreement dated 10-8-2001 not being an agreement under the Arbitration and Conciliation Act, the award (Annexure 7) cannot be executed in terms of the provisions of the Arbitration Act, 1940 or Arbitration and Conciliation Act, 1996. So, the Executive proceeding before the District Judge is not maintainable and the order passed by the learned single Judge is correct and justified. 5. Mr. Arun Khosla, learned counsel for the appellant, submitted that the subsequent agreement entered into between the parties ousting the applicability of the Arbitration Act, 1940 is contrary to the constitutional mandate and the same is not sustainable. 5. Mr. Arun Khosla, learned counsel for the appellant, submitted that the subsequent agreement entered into between the parties ousting the applicability of the Arbitration Act, 1940 is contrary to the constitutional mandate and the same is not sustainable. According to him, reference of the matter to the Arbitrator on the basis of the mechanism evolved by virtue of the decision in Oil and Natural Gas Commission (supra) and the award passed by Sri N. C. Jain are correct and legal, but ousting the applicability of Arbitration Act, 1940 and evolving a mechanism that appeal shall lie to the Law Secretary is a nullity in the eye of law as laid down under Section 23 of the Contract Act, i.e., 1) forbidden by law and 2) opposed to public policy. Mr. Khosla drew our attention to the decision of the Delhi High Court in Ircon International Ltd. v. National Building Construction Corporation Ltd. reported in 155 (2008) DLT 226 (DB), wherein the Court dealing with a similar question held in Paragraph 6 of the judgment thus: "6. NBCC filed their objections under Section 47 of CPC stating that the execution application was not maintainable in view of ouster provision contained in the arbitration agreement to the effect that: "The Arbitration and Conciliation Act, 1996 (for short the 'Act') shall not be applicable to arbitration under this clause". The said provision reads as under : "In the event of any dispute or difference relating to the interpretation and application of the provisions of the contracts, such disputes or differences shall be referred by either party for arbitration to the Sole Arbitrator in the Department of Public Enterprises. The Arbitration and Conciliation Act, 1996 shall not be applicable to arbitration under this clause. The award of the Arbitrator shall be binding upon the parties to the dispute, provided, however, any party aggrieved by such award may make a further reference for setting aside or revision of the award to the Law Secretary, Department of Legal Affairs, Minister of Law and Justice, Govt. of India. Upon such reference the dispute shall be decided by the Law Secretary or the Special Secretary/Additional Secretary, when so authorised by the Law Secretary, whose decision shall bind the parties finally and conclusively. The parties to the dispute will share equally the cost of arbitration as intimated by the Arbitrator." 6. of India. Upon such reference the dispute shall be decided by the Law Secretary or the Special Secretary/Additional Secretary, when so authorised by the Law Secretary, whose decision shall bind the parties finally and conclusively. The parties to the dispute will share equally the cost of arbitration as intimated by the Arbitrator." 6. After a careful perusal of the entire judgment of the Delhi High Court in Ircon International v. National Building Construction Corporation (supra), we respectfully disagree with the view taken therein. The factual aspect of the present case is very clear that both the parties have entered into an agreement, which contained an Arbitration Clause. But subsequently, on their own volition, they consented to abandon the Arbitration Clause and entered into another agreement to refer their matter as per the mechanism evolved by virtue of the judgment of Apex Court indicated herein before. So it is incumbent upon the parties to the subsequent agreement to abide by the said agreement in toto and take recourse to the mechanism evolved by them. Mere use of word 'arbitration' or 'arbitrator' in a clause in the agreement will not make it an arbitration agreement and the intention of the parties to enter into the arbitration agreement shall have to be gathered from the terms of the agreement. In the case at hand, from the conduct and intention of the parties, it is clear that they have abandoned the Arbitration Clause and entered into another agreement to refer the disputes for arbitration as per the mechanism evolved by the Central Government. This aspect has not been taken into consideration by the Delhi High Court in Ircon International (supra). In view of the above, at this stage, during pendency of the appeal, which is contested by the respondent-PPT, execution of the award is pre-mature. So, we are in agreement with the view taken by the learned single Judge of this Court in the impugned order dated 1-8-2005 passed in W.P.(C) No. 8673/2004. The Writ Appeal is accordingly dismissed. R. N. BISWAL, J. :- 7. I agree. Appeal dismissed.