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2012 DIGILAW 959 (PAT)

Bhagwan Singh v. Managing Director, Central Warehousing Corporation

2012-07-12

V.NATH

body2012
JUDGMENT 1. This appeal arises out of judgment and decree passed in T.S. No. 136 of 2000 on 31.1.2003 by Sub-Judge-1, Patna refusing the relief prayed by the plaintiff to make the award as published by the arbitrator a Rule of court and to pass a decree in terms of the award alongwith future interest. 2. It will suffice, in view of the limited submission on behalf of the appellant on the question-of law alone, to notice the factual details in brief that the plaintiff entered into contracts with the defendants for handling and transportation work of food-grains and fertilizers at central warehouses in Dehri and Ranchi. All the contracts were executed in between the years 1991 and 1993. The dispute, however, arose between the plaintiff and defend- ants, and the plaintiff made demand for arbitration on 24.5.1996 invoking arbitration clause in the contracts. The defendant no. 1 on 26.9.1997 appointed a sole arbitrator but the said arbitrator failed to take up the assignment and no arbitral proceeding could be initiated. Thereafter, the plaintiff filed an application under the provisions of the Arbitration Act, 1940, which was marked as T.S. No. 119 of 1998 before the Court of Sub-Judge-1, Patna, praying for revocation of the authority of the appointed arbitrator, and appointment of another sole arbitrator by the court from the panel of the officers mentioned in the petition and to direct the arbitrator to make and publish his award within 4 months as provided in the Arbitration Act, 1940. The T.S. No. 119 of 1998 was decreed by the judgment and decree dated 28.11.1998 by which the learned court appointed a sole arbitrator to adjudicate the dispute between the parties with direction to him to publish his award within 4 months. The arbitration proceeding was initiated and after hearing the parties the sole arbitrator made and published his award on 31.8.1999. The plaintiff received the copy of the award on 26.9.1999 and then filed Misc. Case No.44 of 1999 praying to make the said award a rule of court and pass a decree in terms of the award. This Misc. Case No. 44 of 1999 was later converted to T.S. No. 136 of 2000 before the Court of Sub-Judge-1, Patna. 3. The plaintiff received the copy of the award on 26.9.1999 and then filed Misc. Case No.44 of 1999 praying to make the said award a rule of court and pass a decree in terms of the award. This Misc. Case No. 44 of 1999 was later converted to T.S. No. 136 of 2000 before the Court of Sub-Judge-1, Patna. 3. The defendants appeared and raised the objection inter alia that after coming into force of the Arbitration and Conciliation Act, 1996, the court had no jurisdiction to appoint the arbitrator and' the award given by such arbitrator was clearly without jurisdiction and thus a nullity and could not thereafter be made rule of court. It was also submitted that mere participation in the arbitral proceeding would not confer the jurisdiction upon the arbitrator and as this objection snapped the root of the jurisdiction rendering the award void, it could be raised even at this stage. 4. By the impugned judgment and decree, the learned court below has come to the conclusion that the appointment of the arbitrator, in T.S. No. 119/98 under the provisions of the Arbitration Act, 1940, was without jurisdiction as the said Act already stood repealed by the Arbitration and Conciliation Act, 1996, much before the date of filing of the T.S. No. 119/98. It has been further held that the proceeding before the arbitrator, thus, also was without jurisdiction from its inception and therefore, the award given by him cannot be made Rule of Court. Accordingly, the suit has been dismissed. 5. Heard the learned counsel for the appellant. No one has appeared on behalf of the respondents. 6. The learned counsel appearing on behalf of the appellant has raised his sole contention that the provisions of the Arbitration Act, 1940 are clearly applicable to the facts and circumstances of the case. It has been contended that the arbitrator was appointed by the court after hearing the parties and thereafter the said arbitrator entered into the reference and conducted the arbitral proceeding in which the defendants fully participated and never raised any objection to the jurisdiction. It has been pointed out that even during the proceeding before the arbitrator, both the parties at one stage agreed that the arbitration proceeding would be governed by the Arbitration and Conciliation Act, 1996 (hereinafter also referred to as "new Act") which fact had. It has been pointed out that even during the proceeding before the arbitrator, both the parties at one stage agreed that the arbitration proceeding would be governed by the Arbitration and Conciliation Act, 1996 (hereinafter also referred to as "new Act") which fact had. been mentioned in the order dated 23.5.1999 of the proceeding on 23.5.1999, but later on the plaintiff had changed his stand stating that he had incorrectly stated earlier that the new Act would apply and in fact it was the Arbitration Act of 1940 which was applicable. It has been further submitted that the respondents did not object to this plea of the plaintiff and the same was thus accepted by the arbitrator. The learned counsel has argued that once after having participated in the suit wherein the reference was made and thereafter having participated in the arbitration proceeding, the respondents in fact had waived their right to raise objection to the jurisdiction in view of Section 4 of the new Act. The "learned counsel has further canvassed that even in the interest of justice and after taking a pragmatic view of the matter, this Court should allow this appeal and set aside the impugned judgment and decree as the appellant after having performed the work of the respondents has been running from pillar to post for the payment of his legal dues. 7. In view of the submissions on behalf of the appellant, the points which emerge for determination in this appeal are :- (1) Whether the arbitration agreement between the parties is to be governed by the provisions of the Arbitration Act, 1940 or the Arbitration and Conciliation Act, 1996? (2) Whether the impugned judgment and decree of the learned court below refusing the prayer of the plaintiff for making the award rule of court are sustainable in law and on facts? 8. The fact is not in dispute that the contracts between the plaintiff and the defendants contain the arbitration clause which provides that in case of dispute and difference arising out of the contracts, the Managing Director, Central Warehousing Corporation, New Delhi shall make a reference to the sole arbitrator appointed by him. It has further been provided in the arbitration clause that in case of such arbitrator failing to give his award, another person is to be appointed as arbitrator. It has further been provided in the arbitration clause that in case of such arbitrator failing to give his award, another person is to be appointed as arbitrator. It is also one of the terms of the arbitration clause that no other person would act as an arbitrator except the person appointed by the Managing Director, Central Warehousing Corporation, New Delhi and if no such appointment of arbitrator is made or the reference does not result in award, the dispute and differences are not to be referred at all. Lastly it has also been provided that the Arbitration Act, 1940 shall apply to the arbitration proceeding under this cause. 9. The difference and dispute between the plaintiff and defendants cropped up and the plaintiff on 24.5.1996 made the demand for appointment of an arbitrator in pursuance to the arbitration clause. The defendant no. 1 Managing Director, Central Warehousing Corporation, New Delhi appointed Mr. S.K. Bhatnagar as sole arbitrator but he eventually failed to initiate the arbitration proceeding. Thereafter, the plaintiff filed petition before the SubJudge-1, Patna, under the provisions of Arbitration Act, 1940 for reference of the dispute to an arbitrator appointed by the court. The said application was marked as T.S. No. 119 of 1998 before the Court of Sub-Judge-1. Patna. 10. The defendants appeared and stated that after Mr. S.K. Bhatnagar declined to Act as arbitrator, Mr. Raj Kumar, a retired member Railway Board, had been nominated as arbitrator and the plaintiff had been duly informed of his appointment as arbitrator. On this basis the defendants asserted that the plaintiff was not entitled to get the relief of appointment of an arbitrator by the court. 11. By its judgment and decree dated 28.11.1998, the learned court held that the appointment of another arbitrator Mr. Raj Kumar was without jurisdiction and it was the court alone which could now appoint an arbitrator, and accordingly appointed Mr. A.P. Parasar as sole arbitrator to adjudicate the disputes between the parties and publish his award within a period of four months. 12. The sole arbitrator appointed by the court as aforesaid accepted the reference, initiated the proceeding and after hearing the parties, made and published his award on 31.8.1999. Thereafter, the plaintiff filed the Misc. A.P. Parasar as sole arbitrator to adjudicate the disputes between the parties and publish his award within a period of four months. 12. The sole arbitrator appointed by the court as aforesaid accepted the reference, initiated the proceeding and after hearing the parties, made and published his award on 31.8.1999. Thereafter, the plaintiff filed the Misc. Case No. 44 of 1999, subsequently converted into T.S. No.136 of 2000, praying for making the said award rule of court and passing the decree on the basis of the said award. The said prayer has been rejected by the impugned judgment and decree. 13. The Arbitration and Conciliation Act, 1996 has come into force on 25.1.1996 and thereafter the matters relating to the arbitration agreement including the reference, appointment of arbitrator, conduct of the arbitral proceeding, recourse against arbitral award and enforcement of arbitral award are to be governed by the provisions of this Act. By Clause (1) of Section 85 of this Act, the earlier legislations including the Arbitration Act 1940 have been repealed but Clause (2) of Section 85 which is the saving clause provides as follows:- Section 85(2). Notwithstanding such repeal.-(a) the provisions of the said enactments shall apply in relation to arbitral proceedings which commenced before this Act came into force unless otherwise agreed by the parties but this Act shall apply in relation to arbitral proceedings which commenced on or after this Act comes into force; 14. Section 21 of this new Act deals with the commencement of arbitral proceedings and provides as follows:- Section 21. Commencement of arbitral proceedings.-Unless otherwise agreed by the parties, the arbitral proceedings in respect of a particular dispute commence on the date on which a request for that dispute to be referred to arbitration is received by the respondent. 15. The conjoint reading of the aforesaid two provisions makes it clear that the provisions of the repealed Arbitration Act, 1940 will be applicable only to the arbitral proceeding which commenced before the new Act came into force. 15. The conjoint reading of the aforesaid two provisions makes it clear that the provisions of the repealed Arbitration Act, 1940 will be applicable only to the arbitral proceeding which commenced before the new Act came into force. The effect of the repeal of a statute is no longer res integra and it is well settled that after its repeal a statute is obliterated completely from the records of the parliament as if it had never been passed and it has to be considered as a law that never existed except for the purposes of those actions which were commenced, prosecuted and concluded while it was an existing law". As such, it is obvious enough that no action can legally be taken under the provisions of the statute which has been repealed. 16. There is no dispute that the plaintiff invoked the arbitration clause in the contract and made the demand for appointment of an arbitrator on 24.5.1996. On that date the Arbitration Act, 1940 had stood repealed. The application before the court for appointment of arbitrator had also been filed by the plaintiff in the year 1998 under the provisions of the Arbitration Act, 1940 and the court had also passed the order exercising its jurisdiction under the said Act and appointed an arbitrator who had passed the award. Thus, everything had been done under the provisions of the Arbitration Act, 1940 which was no longer in force after its repeal on 25.1.1996. 17. Even in view of Section 21 of the new Act also, it is obvious that the provisions of Arbitration Act, 1940 would not be applicable as the arbitral proceeding can be held to have commenced only on 24.5.1996 when the plaintiff for the first time made the demand from the defendants for reference of the dispute to an arbitrator in accordance with the arbitration clause. The Apex Court in the case of Milkfood Ltd. vs. M/s GMC Ice-Cream (P) Ltd., A.I.R. 2004 SC 3145 has laid down that the commencement of arbitral proceeding as contained in Section 21 of the 1996 Act, must be construed having regard to Section 85(2)(a) of the said Act and as such for the purpose of applicability of the 1940 Act, the date of service of notice for appointment on an arbitrator would be the relevant date for the purpose of commencement of the arbitration proceeding. As such, there is no scope for accepting the submission on behalf of the appellant that the appointment of the arbitrator by the court and the award given by the arbitrator in pursuance thereto can be accepted to have been made under the provisions of the Arbitration Act, 1940. 18. The learned counsel on behalf of the appellant has laid much stress on the fact that the defendant-respondents had appeared and contested the prayer of the plaintiff for reference by appointing an arbitrator in T.S. No. 119 of 1998 but never raised objection to the jurisdiction of the court on the ground of non-applicability of the provisions of Arbitration Act, 1940. It has also been pointed out that before the arbitrator also during the arbitration proceeding, the defendants did not raise the said objection even in face of the clear stand of the plaintiff that the provisions of Arbitration Act, 1940 would apply. 19. As already held above that the provisions of Arbitration Act, 1940 would not apply in the facts of the case, it has now to be considered whether the express or implied consent of the defendant-respondents would make the provisions of the said Act applicable. It is well settled that no amount of consent can confer the jurisdiction upon a court or tribunal when there is inherent lack of the same. It is also manifest from the records that the defendant-respondents had never raised this objection either before the court when the reference was made to the arbitrator or during the arbitration proceeding in which they participated. But even then they cannot be precluded from raising the objection that the award is null and void for want of jurisdiction. The Apex Court in the case of Inder Sain Mittal vs. Housing Board Haryana & Ors., A.I.R. 2002 S.C. 1157 [ : 2002(2) PLJR (SC) 30] has held as follows :- ". . .. . .. Where ground is based upon breach of mandatory provision of law, a party cannot be estopped from raising the same in his objection to the award even after he participated in the arbitration proceeding in view of the well settled maxim that there is no estoppel against statute....." 20. . .. . .. Where ground is based upon breach of mandatory provision of law, a party cannot be estopped from raising the same in his objection to the award even after he participated in the arbitration proceeding in view of the well settled maxim that there is no estoppel against statute....." 20. Further, when the plaintiff filed the application in the year 1998 before the court for reference of the dispute by appointing an arbitrator, which was marked as T.S. No. 119/98, the said court had lacked inherent jurisdiction to entertain such a prayer and pass an order on that basis under the provisions of the Arbitration Act, 1940. The court, however, allowed the prayer of the plaintiff and appointed the arbitrator to adjudicate the dispute between the parties and in pursuance thereto the arbitrator gave the award in question. Thereafter, the prayer has been made to make the said award rule of court. Clearly the appointment of the arbitrator and the reference of the dispute to him by the court itself was without jurisdiction and therefore void ab initio and no amount of consent could have validated the award. The principle in this regard is lucent from the decisions of the Balvant N. Viswamitra vs. Yadav Sadashiv Mule (dead) through LRs. & Ors., (2004)8 SCC 706 where it has been laid down that an order passed by a tribunal lacking inherent jurisdiction would be a nullity and such lack of jurisdiction if established will go to the root of the matter. Even the submission with regard to Section 4 of the new Act is also misconceived because the waiver envisaged therein is to be attracted to a proceeding being conducted in accordance with the provisions of the new Act and not to a case where the applicability of the new Act itself is under challenge. 21. The jurisdiction of a court or tribunal is a creation of a statute and cannot be conferred by an agreement or consent. There can also be no waiver of a right to raise objection to the jurisdictional issue which can be raised at any stage and the court would be enjoined to determine the said issue. In the present case, the plaintiff's prayer is to make the award rule of court and pass a decree on the basis of the said award. There can also be no waiver of a right to raise objection to the jurisdictional issue which can be raised at any stage and the court would be enjoined to determine the said issue. In the present case, the plaintiff's prayer is to make the award rule of court and pass a decree on the basis of the said award. As such before granting the relief as prayed, the court is bound to examine the award and find the same to be legally enforceable as passing of a decree on the said basis would amount to granting legal sanction to the award. The learned court below has aptly scrutinized the facts and law and has rightly come to the conclusion that the entire proceeding right from filing of the suit up to the passing of the award was without jurisdiction and therefore nullity and the prayer to make the award rule of court cannot be granted. 22. The learned counsel on behalf of the appellant has submitted that a liberal view should be taken in view of the peculiar facts of this case where the plaintiff is fighting for his legal dues since 1996 and therefore, the appropriate relief by exercising jurisdiction under Order VII Rule 7 C.P.C. may be granted. In view of the facts above noticed, it is difficult to accept the submission of the learned counsel to grant equitable relief to the plaintiff which would, in any view, certainly involve affirmance of the award in question. 23. For the foregoing reasons and discussions, I do not find any merit in this appeal which is, accordingly, dismissed. The impugned judgment and decree passed by the learned court below is affirmed.