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Madhya Pradesh High Court · body

2011 DIGILAW 364 (MP)

Ajit Singh Chaddha v. Kanaklata Thakur

2011-03-18

S.C.SHARMA

body2011
Judgment ( 1. ) SHRI R. S. Chabra, learned counsel for the petitioner. SHRI R. M. Deshpandey for the respondents SHRI G. M. Chaphekar, Sr. Counsel as amicus curiae The petitioner before this Court has filed this present petition under Article 227 of the Constitution of India, being aggrieved by order dated 26-7-2010 passed by the learned arbitrator. ( 2. ) PETITIONER's contention is that an agreement took place on 26-10-1990 between the petitioner and some of the respondents and by virtue of a clause under the Agreement an application was preferred before this Court under section 11(c) of the Arbitration and Conciliation Act, 1996 (for short, 'the Act, 1996') for appointment of an arbitrator. PETITIONER further stated that Shri Atul Sheth was appointed as the Arbitrator vide order dated 21-12-2009 passed in A.C. No. 50/2007. PETITIONER has further stated that the arbitrator passed an order dated 26-7-2010 in respect of certain objections preferred by the petitioner dated 28-6- 2010 and the petitioner left with no other choice has filed this present petition before this Court under Article 227 of the Constitution of India, as it is an order passed by the Arbitration Tribunal. Shri G. M. Chaphekar, Sr. Counsel as amicus curiae appearing in the matter has brought to the notice of this Court a judgment delivered by the Apex Court in the case of M/s S.B.P. and Co. vs. M/s Patel Engineering Ltd., reported in AIR 2006 SC 450 and his contention is that in light of the judgment delivered by the Apex Court, the writ petition under Article 227 is not maintainable against the order passed by the arbitrator and the only remedy available to the petitioner is to prefer an appeal under section 37 of the Act, 1996. He has also drawn the attention of this Court towards sections 5, 34 and 37 of the Act, 1996. ( 3. ) LEARNED counsel for the respondents has also argued before this Court that the present writ petition is not maintainable in light of the aforesaid judgment, which has been brought to the notice of this Court by the learned senior counsel. ( 4. ) HEARD learned counsel for the parties at length and perused the record. The matter is being disposed of at motion hearing stage itself with the consent of the parties. ( 4. ) HEARD learned counsel for the parties at length and perused the record. The matter is being disposed of at motion hearing stage itself with the consent of the parties. In the present case the appointment of arbitrator by this Court vide order dated 21-12-2009 passed in A.C. No. 50/2007 is not in dispute. It is also not in dispute that the arbitrator has rejected the objection preferred by the petitioner by passing an interim order dated 26-7-2010. Sections 34 and 35 of the Act, 1996 reads as under :- "34. Application for setting aside arbitral award - (1) Recourse to a Court against an arbitral award may be made only by an application for setting aside such award in accordance with sub-section (2) and subsection (3). (2) An arbitral award may be set aside by the Court only if - (a) the party making the application furnishes proof that - (i) a party was under some incapacity, or (ii) the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for the time being in force; or (iii) the party making the application was not given proper notice of the appointment of any arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or (iv) the arbitral award deals with a dispute not contemplated by or not falling withing the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration; (v) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Part; or (b) the Court finds that - (i) the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force, or (ii) the arbitral award is in conflict with the public policy of India. (3) An application for setting aside may not be made after three months have elapsed from the date on which the party making that application had received the arbitral award or, if a request had been made under section 33, from the date on which that request had been disposed of by the arbitral tribunal; (4) On receipt of an application under sub-section (1), the Court may, where it is appropriate and it is so requested by a party, adjourn the proceedings for a period of time determined by it in order to give the arbitral tribunal an opportunity to resume the arbitral proceedings or to take such other action, as in the opinion of arbitral tribunal will eliminate the grounds for setting aside the arbitral award. 35. Finality of arbitral awards - Subject to this part an arbitral award shall be final and binding on the parties and persons claiming under them respectively." 6-A. Keeping in view the aforesaid provisions of law, it is an admitted fact that an appeal lies against an award passed by the arbitrator appointed by this Court. Section 5 of the Act, 1996 reads as under :- "5. Extent of judicial intervention - 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." ( 5. ) THE aforesaid statutory provisions of law provides that no judicial authority shall interfere in the matter except where-so provided under the Act. Apex Court in the case of M/s S.B.P. and Co. vs. M/s Patel Engineering Ltd. (supra) in paragraphs 44, 45 and 46 held as under :- "44. It is seen that some High Courts have proceeded on the basis that any order passed by an arbitral tribunal during arbitration, would be capable of being challenged under Article 226 or 227 of the Constitution of India. We see no warrant for such an approach. Section 37 makes certain orders of the arbitral tribunal appealable. Under section 34, the aggrieved party has an avenue for ventilating his grievances against the award including any in-between orders that might have been passed by the arbitral tribunal acting under section 16 of the Act. We see no warrant for such an approach. Section 37 makes certain orders of the arbitral tribunal appealable. Under section 34, the aggrieved party has an avenue for ventilating his grievances against the award including any in-between orders that might have been passed by the arbitral tribunal acting under section 16 of the Act. THE party aggrieved by any order of the arbitral tribunal, unless has a right of appeal under section 37 of the Act, has to wait until the award is passed by the Tribunal. This appears to be the scheme of the Act. THE arbitral tribunal is after all, the creature of a contract between the parties, the arbitration agreement, even mough if the occasion arises, the Chief Justice may constitute it based on the contract between the parties. But that would not alter the status of the arbitral tribunal. It will still be a forum chosen by the parties by agreement. We, therefore, disapprove of the stand adopted by some of the High Courts that any order passed by the arbitral tribunal is capable of being corrected by the High Court under Article 226 or 227 of the Constitution of India. Such an intervention by the High Courts is not permissible. 45. THE object of minimizing judicial intervention while the matter is in the process of being arbitrated upon, will certainly be defeated if the High Court could be approached under Article 227 of the Constitution of India or under Article 226 of the Constitution of India against every order made by the arbitral tribunal. Therefore, it is necessary to indicate that once the arbitration has commenced in the arbitral tribunal, parties have to wait until the award is pronounced unless, of course, a right of appeal is available to them under section 37 of the Act even at an earlier stage. 46. We, therefore, sum up our conclusions as follows : (i) THE power exercised by the Chief Justice of the High Court or the Chief Justice of India under section 11 (6) of the Act is not an administrative power. It is a judicial power. (ii) THE power under section 11(6) of the Act, in its entirety, could be delegated, by the Chief Justice of the High Court only to another judge of that Court and by the Chief Justice of India to another judge of the Supreme Court. It is a judicial power. (ii) THE power under section 11(6) of the Act, in its entirety, could be delegated, by the Chief Justice of the High Court only to another judge of that Court and by the Chief Justice of India to another judge of the Supreme Court. (iii) In case of designation of a judge of the High Court or of the Supreme Court, the power that is exercised by the designated judge would be that of the Chief Justice as conferred by the statute. (iv) THE Chief Justice or the designated judge will have the right to decide the preliminary aspects as indicated in the earlier part of this judgment. These will be, his own jurisdiction, to entertain the request, the existence of a valid arbitration agreement, the existence or otherwise of a live claim, the existence of the condition for the exercise of his power and on the qualifications of the arbitrator or arbitrators. THE Chief Justice or the judge designated would be entitled to seek the opinion of an institution in the matter of nominating an arbitrator qualified in terms of section 11(8) of the Act if the need arises but the order appointing the arbitrator could only be that of the Chief Justice or the judge designate. (v) Designation of a district judge as the authority under section 11(6) of the Act by the Chief Justice of the High Court is not warranted on the scheme of the Act. (vi) Once the matter reaches the arbitral tribunal or the sole arbitrator, the High Court would not interfere with orders passed by the arbitrator or the arbitral tribunal during the course of the arbitration proceedings and the parties could approach the Court only in terms of section 37 of the Act or in terms of section 34 of the Act. (vii) Since an order passed by the Chief Justice of the High Court or by the designated judge of that Court is a judicial order, an appeal will lie against that order only under Article 136 of the Constitution of India to the Supreme Court. (viii) THEre can be no appeal against an order of the Chief Justice of India or a judge of the Supreme Court designated by him while entertaining an application under section 11(6) of the Act. (viii) THEre can be no appeal against an order of the Chief Justice of India or a judge of the Supreme Court designated by him while entertaining an application under section 11(6) of the Act. (ix) In a case where an arbitral tribunal has been constituted by the parties without having recourse to section 11(6) of the Act, the arbitral tribunal will have the jurisdiction to decide all matters as contemplated by section 16 of the Act. (x) Since all were guided by the decision of this Court in Konkan Railway Corpn. Ltd. and anr. vs. Rani Construction Pvt. Ltd., (2002) 2 SCC 388 and orders under section 11(6) of the Act have been made based on the position adopted in that decision, we clarify that appointments of arbitrators or arbitral tribunals thus far made, are to be treated as valid, all objections being left to be decided under section 16 of the Act. As and from this date, the position as adopted in this judgment will govern even pending applications under section 11(6) of the Act. 2002 AIR SCW 426. (xi) Where District Judges had been designated by the Chief Justice of the High Court under section 11(6) of the Act, the appointment orders thus far made by them will be treated as valid; but applications if any pending before them as on this date will stand transferred, to be dealt with by the Chief Justice of the concerned High Court or a Judge of that Court designated by the Chief Justice. (xii) THE decision in Konkan Railway Corpn. Ltd. and anr. vs. Rani Construction Pvt. Ltd., (2002) 2 SCC 388 is overruled. 2002 AIR SCW 426" ( 6. ) THE Apex Court in the aforesaid judgment has held that no petition under Articles 226 and 227 of the Constitution of India is maintainable against any order passed by the Arbitration Tribunal during arbitration proceedings and a remedy is available under section 34 or 37 of the Act, 1996. Learned counsel for the petitioner has vehementally argued before this Court that under Article 227 of the Constitution of India as the High Court is having the power of superintendence a writ petition is maintainable against an order passed by a Tribunal. This Court has carefully gone through Article 227 of the Constitution of India and the same reads as under :- 227. This Court has carefully gone through Article 227 of the Constitution of India and the same reads as under :- 227. Power of superintendence over all Courts by the High Court- (1) Every High Court shall have superintendence over all Courts and tribunals throughout the territories in relation to which it exercises jurisdiction. (2) Without prejudice to the generality of the foregoing provisions, the High Court may - (a) call for returns from such Courts; (b) make and issue general rules and prescribe forms for regulating the practice and proceedings of such Courts; and (c) prescribe forms in which books, entries and accounts shall be kept by the officers of any such Courts. (3) The High Court may also settle tables of fees to be allowed to the sheriff and all clerks and officers of such Courts and to attorneys, advocates and pleaders practicing therein : Provided that any rules made, forms prescribed or tables settled under clause (2) or clause (3) shall not be inconsistent with the provisions of any law for the time being in force, and shall require the previous approval of the Governor. (4) Nothing in this article shall be deemed to confer on a High Court powers of superintendence over any Court or tribunal constituted by or under any law relating to the Armed Forces." ( 7. ) FROM the bare perusal of the aforesaid article it is true that High Court is having superintendence over all Courts and tribunals throughout the territories in relation to which it exercise jurisdiction, but at the same time it is having power of superintendence over the tribunals constituted under Article 323-A and 323-B. ( 8. ) FROM the bare perusal of the aforesaid article it is true that High Court is having superintendence over all Courts and tribunals throughout the territories in relation to which it exercise jurisdiction, but at the same time it is having power of superintendence over the tribunals constituted under Article 323-A and 323-B. ( 8. ) ARTICLE 323-A empowers the Parliament to enact a law for adjudication of trial by Administrative Tribunals and the Administrative Tribunals Act, 1985 is a legislature in terms of ARTICLE 323-A. Similarly, ARTICLE 323-B also empowers the legislature to enact and act for adjudication of disputes, complaints or offences in respect of certain matters and keeping in view the aforesaid article, the High Court does have the power to exercise powers of superintendence over all tribunals constituted by a legislature on the terms of ARTICLE 323-A and ARTICLE 323-B. It certainly does not include a Arbitration Tribunal as arbitrators are appointed under the provisions of Arbitration and Reconciliation Act, 1996 and the arbitral tribunal is certainly not a Tribunal having the same meaning as a tribunal constituted under ARTICLE 323-A and 323-B. Apex Court in the case of L. Chandrakumar vs. Union of India and others, reported in 1997(1) MPLJ (SC) 621 = (1997) 3 SCC 261 in paragraphs 79, 81, 90, 91, 92, 94 and 99 held as under:- 79. We also held that the power vested in the High Courts to exercise judicial superintendence over the decisions of all Courts and tribunals within their respective jurisdiction is also part of the basic structure of the Constitution. This is because a situation where the High Courts are divested of all other judicial functions apart from that of constitutional interpretation is equally to be avoided. 81. 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. 81. 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. So long as the jurisdiction of the High Courts under Artilces 226/227 and that of this Court under ARTICLE 32 is retained, there is no reason why the power to test the validity of legislations against the provisions of the Constitution cannot be conferred upon Administrative Tribunals created under the Act or upon Tribunals created under ARTICLE 323-B of the Constitution. It is to be remembered that, apart from the authorization that flows from ARTICLEs 323-A and 323-B, both Parliament and the State Legislatures possess legislative competence to effect changes in the original jurisdiction of the Supreme Court and the High Courts. This power is available to Parliament under Entries 77, 78, 79 and 95 of List I and to the State Legislatures under Entry 65 of List II; Entry 46 of List III can also be availed of both by Parliament and the State Legislatures for this purpose. 90. We may first address the issue of exclusion of the power of judicial review of the High Courts. We have already held that in respect of the power of judicial review, the jurisdiction of the High Courts under ARTICLEs 226/227 cannot wholly be excluded. It has been contended before us that the Tribunals should not be allowed to adjudicate upon matters where the vires of legislations is questioned, and that they should restrict themselves to handling matters where constitutional issues are not raised. We cannot bring ourselves to agree to this proposition as that may result in splitting up proceedings and may cause avoidable delay. If such a view were to be adopted it would be open for litigants to raise constitutional issues, many of which may be quite frivolous, to directly approach the High Courts and thus subvert the jurisdiction of the Tribunals. Moreover, even in these special branches of law, some areas do involve the consideration of constitutional questions on a regular basis; for instance, in service law matters, a large majority of cases involve an interpretation of ARTICLEs 14, 15 and 16 of the Constitution. Moreover, even in these special branches of law, some areas do involve the consideration of constitutional questions on a regular basis; for instance, in service law matters, a large majority of cases involve an interpretation of ARTICLEs 14, 15 and 16 of the Constitution. To hold that the Tribunals have no power to handle matters involving constitutional issues would not serve the purpose of which they were constituted. On the other hand, to hold that all such decisions will be subject to the jurisdiction of the High Courts under ARTICLEs 226/227 of the Constitution before a Division Bench of the High Court within whose territorial jurisdiction the Tribunal concerned falls will serve two purposes. While saving the power of judicial review of legislative action vested in the High Courts under ARTICLE 226/227 of the Constitution, it will ensure that frivolous claims are filtered out through the process of adjudication in the Tribunal. The High Court will also have the benefit of a reasoned decision on merits which will be of use to it in finally deciding the matter. 91. It has been contended before us that even in dealing with cases which ire properly before the Tribunals, the manner in which justice is dispensed by them leaves much to be desired. Moreover, the remedy provided in the parent statutes, by way of an appeal by special leave under ARTICLE 136 of the Constitution, is too costly and inaccessible for it to be real and effective. Further more, the result of providing such a remedy is that the docket of the Supreme Court is crowded with decisions of Tribunals that are challenged on relatively trivial grounds and it is forced to perform the role of a first appellate Court. We have already emphasized the necessity for ensuring that the High Courts are able to exercise judicial superintendence over the decisions of the Tribunals under ARTICLE 227 of the Constitution. In R. K. Jain case, after taking note of these facts, it was suggested that the possibility of an appeal from the Tribunal on questions of law to a Division Bench of a High Court within whose territorial jurisdiction the Tribunal falls, be pursued. It appears that no follow up action has been taken pursuant to the suggestions. Such a measure would have improved matters considerably. It appears that no follow up action has been taken pursuant to the suggestions. Such a measure would have improved matters considerably. Having regard to both the aforestated contentions, we hold that all decisions of Tribunals, whether created pursuant to ARTICLE 323-A or ARTICLE 323-B of the Constitution, will be subject to the High Court's writ jurisdiction under ARTICLEs 226/227 of the Constitution before a Division Bench of the High Court within whose territorial jurisdiction the particular Tribunal falls. 92. We may add here that under the existing system, direct appeals have been provided from the decisions of all Tribunals to the Supreme Court under ARTICLE 136 of the Constitution. In view of our above mentioned observations, this situation will also stand modified. In the view that we have taken, no appeal from the decision of a Tribunal will directly lie before the Supreme Court under ARTICLE 136 of the Constitution; but instead, the aggrieved party will be entitled to move the High Court under ARTICLEs 226/227 of the Constitution and from the decision of the Division Bench of the High Court the aggrieved party could move this Court under ARTICLE 136 of the Constitution. 94. The directions issued by us in respect of making the decisions of Tribunals amenable to scrutiny before a Division Bench of the respective High Courts will, however, come into effect prospectively i.e. will apply to decisions rendered hereafter. To maintain the sanctity of judicial proceedings, we have involved the doctrine of prospective overruling so as not to disturb the procedure in relation to decisions already rendered. 99. In view of the reasoning adopted by us, we hold that clause 2(d) of ARTICLE 323-A and clause 3(d) of ARTICLE 323-B to the extent they exclude the jurisdiction of the High Courts and the Supreme Court under ARTICLEs 226/227 and 32 of the Constitution, are unconstitutional. Section 28 of the Act and the "exclusion of jurisdiction" clauses in all other legislations enacted under the aegis of ARTICLEs 323-A and 323-B would, to the same extent, be unconstitutional. 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. 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. The Tribunals created under ARTICLE 323-A and ARTICLE 323- B of the Constitution are possessed of the rules. All decisions of these Tribunals will, however, be subject to scrutiny before a Division Bench of the High Court within whose jurisdiction the Tribunal concerned falls. The Tribunals will, nevertheless, continue to act like Courts of first instance in respect of the areas of law for which they have been constituted. It will not, therefore, be open for litigants to directly statutory legislations (except where the legislation which creates the particular Tribunal is challenged) by overlooking the jurisdiction of the Tribunal concerned. Section 5(6) of the Act is valid and constitutional and is to be interpreted in the manner we have indicated." Keeping in view the aforesaid judgment of the Apex Court this Court have the power to exercise its superintendence over the tribunals throughout the territories in relation to which it exercise jurisdiction but only in respect of the tribunals constituted under Article 323-A and 323-B of the Constitution of India. ( 9. ) KEEPING in view the aforesaid judgment delivered by the Apex Court the admission is declined and the writ petition is dismissed at motion stage. However, liberty is granted to the petitioner to challenge the award passed by the arbitrator by raising all possible grounds. Petition dismissed.