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2014 DIGILAW 1316 (RAJ)

Bharat Sanchar Nigam Limited v. Vijay Electrical, Vallabhnagar Partnership Firm

2014-07-03

SANDEEP MEHTA

body2014
JUDGMENT 1. - The instant appeal has been filed on behalf of the appellant - BSNL against the judgment and decree dated 26.8.2013 passed by the learned Additional District and Sessions Judge, No. 1, Chittorgarh in Civil Misc. Suit No. 45/2007, whereby, the application filed by the appellant under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the Act) was returned. 2. A contractual dispute between the appellant and the respondent was referred to the sole arbitrator, a retired judge of the Rajasthan High Court. The arbitrator concluded the arbitral proceedings and awarded a sum of rupees one lac to the claimant-respondent - M/s. Vijay Electrical, Vallabhnagar. The appellant-BSNL filed an application under Section 34 of the Act in the Court of the learned Additional District Judge, No. 1, Chittorgarh and challenged the award passed by the arbitrator. During the pendency of the proceedings, the respondent filed an application raising a preliminary objection under Section 42 of the Act that the sole arbitrator was appointed by the Rajasthan High Court, therefore, the application under Section 34 of the Act was only maintainable before the Rajasthan High Court and could not be entertained by the District Judge. 3. The appellant filed a reply and contested the preliminary objection. The learned Additional District Judge, No. 1, Chittorgarh, by order dated 26.8.2013 accepted the application filed by the respondent and held that the sole arbitrator was appointed by the High Court and as a necessary consequence, the application under Section 34 of the Act could only be filed before the High Court and returned the same back to the appellant for being presented before the Appropriate Court i.e. the High Court. The said order has been assailed by the appellant by way of the instant appeal. 4. Learned Counsel Shri Dinesh Godara appearing for the appellant on behalf of the A.S.G. Shri V.K. Mathur vehemently contended that the learned Tribunal misread the provision of Section 42 of the Act and without proper application of mind returned the application back for being presented before the High Court. He submitted that Section 42 of the Act only applies to the proceedings covered by the Act. He urged that the order under challenge having been passed in gross disregard to the provision of Section 34 of the Act should be set aside and the appeal be accepted. 5. He submitted that Section 42 of the Act only applies to the proceedings covered by the Act. He urged that the order under challenge having been passed in gross disregard to the provision of Section 34 of the Act should be set aside and the appeal be accepted. 5. Learned Counsel Shri Tribhuwan Gupta appearing on behalf of the respondent was not in position to oppose the submissions and contentions advanced by the learned Counsel for the appellant and frankly conceded that the provisions of Section 42 of the Act were misinterpreted by the Lower Court and the direction to return back the application filed under Section 34 of the Act is illegal. 6. Heard learned Counsel for the parties, perused the order impugned and the material available on the record. 7. The controversy involved in the case at hand was considered by a Coordinate Bench of this Court in the cases of M/s. Anand Bhatiya Contractor v. Union of India & Anr. (S.B. Civil Misc. Application No. 60/2012) , Union of India & Anr. v. M/s. Anand Bhatiya Contractor & Anr. (S.B. Civil Writ Petition No. 8697/2012) and Union of India v. M/s. Anand Bhatiya Contractor & Ors. (S.B. Civil Misc. Appeal No. 1856/2012) decided on 4.3.2014. This Court appreciated the issue in detail and held as below "The Additional District Judge accepted the application preferred under Order 7, Rule 11 Code of Civil Procedure on the count that the sole arbitrator in the instant matter was appointed by invoking authority under Section 11(6) of the Act of 1996 and that being the judicial proceeding, the application would have been filed before the Court that appointed arbitrator, being a mandate of Section 42 of the Act of 1996. Precisely, the questions for adjudication before this Court are that (1) whether the Chief Justice or the person or institution designated by him to exercise powers under Section 11(6) of the Act of 1996 can be treated as a Court as per provisions of Section 2(1)(e) of the Act of 1996?, and (2) whether the provisions of Section 42 of the Act of 1996 can be attracted in a case where powers have been exercised by the Chief Justice or the person or institution designated by him for appointment of an arbitrator as per Section 11(6) of the Act of 1996? It is not at all in dispute that the powers under Section 11(6) of the Act of 1996 are judicial powers, however, merely on that count whether the authority exercising such power can be treated as a Court, is the issue require consideration. The term 'Court' as defined under Section 2(1)(e) of the Act of 1996 reads as under "'Court' means the Principal Civil Court of original jurisdiction in a District, and includes the High Court in exercise of its ordinary original civil jurisdiction, having jurisdiction to decide the questions forming the subject-matter of the arbitration if the same had been the subject-matter of a suit, but does not include any Civil Court of a grade inferior to such Principal Civil Court, or any Court of Small Causes." The authority given for appointment of an arbitrator under Section 11 to Hon'ble the Chief Justice of India and Hon'ble the Chief Justices of the High Courts under sub-sections (4), (5) and (6) of Section 11 of the Act of 1996, is as under "(4) If the appointment procedure in sub-section (3) applies and - (a) a party fails to appoint an arbitrator within thirty days from the receipt of a request to do so from the other party; or (b) the two appointed arbitrators fail to agree on the third arbitrator within thirty days from the date of their appointment, the appointment shall be made, upon request of a party, by the Chief Justice or any person or institution designated by him. (5) Failing any agreement referred to in sub-section (2), in an arbitration with a sole arbitrator, if the parties fail to agree on the arbitrator within thirty days from receipt of a request by one party from the other party to so agree the appointment shall be made, upon request of a party, by the Chief Justice or any person or institution designated by hint. (6) Where, under an appointment procedure agreed upon by the parties, - (a) a party fails to act as required under that procedure; or (b) the parties, or the two appointed arbitrators, fail to reach an agreement expected of them under that procedure; or (c) a person, including an institution, fails to perform any function entrusted to him or it under that procedure, a party may request the Chief Justice or any person or institution designated by him to take the necessary measure, unless the agreement on the appointment procedure provides other means for securing the appointment." At this point it shall also be appropriate to refer sub-section (10) of Section 11 of the Act of 1996 that empowers the Chief Justice to make the scheme for dealing with the matters entrusted under the provisions referred above. As per sub-section (10) "The Chief Justice may make such scheme as he may deem appropriate for dealing with matters entrusted by sub-section (4) or sub-section (5) or subsection (6) to him." It shall be important to notice here that in entire Section 11 of the Act of 1996 the term 'Court' has not been used by the legislature. The terms used are 'the Chief Justice' or 'the person or institution designated by the Chief Justice'. These terms have not been defined under the Act of 1996. Section 42 of the Act of 1996 pertains to the jurisdiction and that reads as under "42. Jurisdiction. - Notwithstanding anything contained elsewhere in this Part or in any other law for the time being in force, where with respect to an arbitration agreement any application under this Part has been made in a Court, that Court alone shall have jurisdiction over the arbitral proceedings and all subsequent applications arising out of that agreement and the arbitral proceedings shall be made in that Court and in the other Court." Hon'ble Supreme Court in Rodemadan India Ltd. v. International Trade Expo Centre Ltd. reported in AIR 2006 SC 3456 , while taking note of this legal background, held as under "9. In short, the power under Section 11(6) is the power of a designate referred to under the section and not that of the Supreme Court, albeit that it has now been held to have judicial characteristics by reason of the judgment in Patel Engineering (supra). In short, the power under Section 11(6) is the power of a designate referred to under the section and not that of the Supreme Court, albeit that it has now been held to have judicial characteristics by reason of the judgment in Patel Engineering (supra). Since this is the power of the Chief Justice and not the power of the Supreme Court, the specification in Order 7, Rule 1 of the Rules as to the minimum number of Judges, would have no application thereto. If the argument of the learned Counsel is right, then even the Chief Justice cannot pass such an order unless he is sitting in a Bench with one or more companion Judge. No such intention is evidenced by Parliament in enacting Section 11(6) of the Act. Since Parliament has enacted a law under which the power is exercisable by the Chief Justice or his designate, who could be "any person or institution", I do not think that the requirement of Order 7, Rule 1 of the Rules would apply to such a situation at all. The contention is, therefore, rejected." With the finding aforesaid Hon'ble Supreme Court held that neither the Chief Justice nor his designate under Section 11(6) is a 'Court' as contemplated under Section 2(1)(e) of the Act of 1996, thus, no need is there to place an application for appointment of arbitrator before a Bench consisting of two Judges. As already stated, the term 'Court' is not used in Section 11 of the Act of 1996 and the authority for appointment of arbitrator is conferred to the Chief justice of his designate. If the legislature was intending to get the applications for appointment of arbitrators by the Supreme Court or the High Court, as the case may be, then the term 'Court itself could have been used in the provision aforesaid. The reading of Section 11 clearly indicates intent of the legislature to assign power to the Chief Justice and not to the Court. As such, the power exercised by the Chief Justice or his designate is a statutory judicial power i.e. not exercised by the 'Court' as defined under Section 2(1)(e) of the Act of 1996. So far as the law laid down by Hon'ble Supreme Court in Executive Engineer, Road Development Division No. Ill, Panvel & Anr. As such, the power exercised by the Chief Justice or his designate is a statutory judicial power i.e. not exercised by the 'Court' as defined under Section 2(1)(e) of the Act of 1996. So far as the law laid down by Hon'ble Supreme Court in Executive Engineer, Road Development Division No. Ill, Panvel & Anr. (supra), is concerned, it shall be appropriate to notice that the issue was about institution of the applications under Section 34, when the two Courts i.e. a Court subordinate and the High Court are having authority to exercise jurisdiction. Hon'ble Supreme Court held that one arbitral award, if challenged in two different Courts by different parties to the award, would breach the principal contained in Section 42 of the Act of 1996. The eventuality as considered in this case arose as the High Court, of Bombay is vested with ordinary original civil jurisdiction over the same area, for which jurisdiction is also exercised by a Subordinate Court. In the case aforesaid no issue as such was there about treating the powers under Section 11(6) of the Act of 1996 as of the Court as defined under Section 2(1)(e). Having considered the legal position noticed above, I am having no hesitation in holding that the powers under Section 11(6) of the Act of 1996 are of the Chief Justice and not of the 'Court'. The case aforesaid as such is having no application in present controversy. An important aspect of the matter is that Section 42 of the Act of 1996 pertains to eventuality where an application is preferred to a Court. As per the Scheme of the Act of 1996 and the Rules framed thereunder, a party to an agreement is required to make a 'request' to the Chief Justice for appointment of an arbitrator. It is also pertinent to notice that as per sub-section (10) of Section 11 of the Act of 1996, the Chief Justice may make such scheme as he may deem appropriate for dealing with the matters entrusted by sub-section (4) or sub-section (5) or sub-section (6) to him. The appointment of an arbitrator by the Chief Justice of India Scheme 1996 under its Clauses 2, 3, 4, 5 and 6 in quite unambiguous terms mentions about 'request' i.e. to be made for appointment of an arbitrator. The scheme applicable to the High Court is para-materia to the Scheme of 1996. The appointment of an arbitrator by the Chief Justice of India Scheme 1996 under its Clauses 2, 3, 4, 5 and 6 in quite unambiguous terms mentions about 'request' i.e. to be made for appointment of an arbitrator. The scheme applicable to the High Court is para-materia to the Scheme of 1996. The reference of the term 'application' is made under Sections 8, 9 and 10 of the Act of 1996. The legislature, if was intending to have 'application' for appointing an arbitrator too, then no need was there to refer the term 'request' in Section 11 and also under the scheme made as per Section 11(10) of the Act of 1996, as such, the term 'request' used under Section 11 of the Act of 1996 is not required to be read as 'application' referred in Section 42. The resultant is that (1) The Chief Justice or person or institution designated by him to exercise powers under Section 11(6) of the Act of 1996 is not a 'Court' as defined under Section 2(1)(e) of the Act of 1996; and (2) The provisions of Section 42 of the Act of 1996 are not applicable where power has been exercised by the Chief Justice or his designate for appointment of an arbitrator in accordance with Section 11(6) of the Act of 1996." 8. The view taken by this Court in the above quoted paras makes it clear that the Hon'ble Chief Justice or the person or institution designated by him to exercise the powers of appointing an Arbitrator under Section 11(6) of the Act does not act as a Court. The provisions of Section 42 of the Act of 1996 are not applicable where the Arbitrator has been appointed under Section 11 (6) of the Act by the Hon'ble Chief Justice or the person designated by him. 9. As an upshot of the above discussion, it is manifest that the learned Additional District Judge was not justified in returning the application file by the appellant under Section 34 of the Act for being presented before the High Court. The order under challenge does not stand to scrutiny and deserves to be set aside. 10. Resultantly, the appeal is allowed. The judgment and decree dated 26.8.2013 passed by the learned Additional District Judge, No. 1, Chittorgarh in Civil Misc. Suit No. 45/2007 is set aside. The order under challenge does not stand to scrutiny and deserves to be set aside. 10. Resultantly, the appeal is allowed. The judgment and decree dated 26.8.2013 passed by the learned Additional District Judge, No. 1, Chittorgarh in Civil Misc. Suit No. 45/2007 is set aside. The learned Court below shall proceed with and decide the application filed by the appellant under Section 34 of the Act as per law expeditiously.Appeal allowed. *******