Unitech Limited v. Madhya Pradesh Rural Road Development Corporation
2015-02-09
SANJAY YADAV
body2015
DigiLaw.ai
JUDGMENT : Sanjay Yadav, J. 1. Additional documents filed vide I.A. No. 1542/15 and I.A. No. 1543/15 in W.P. No. 11201/2013 and W.P. No. 11029/2013 respectively, are taken on record. 2. Arguments heard. 3. These batch of writ petitions are directed against an order dated 10.12.2012 passed by the Tenth Additional District Judge, Bhopal, entertaining an application under Section 14(2) of the Arbitration and Conciliation Act, 1996 (for brevity 1996 Act') and terminating the mandate of the Arbitrator holding that the dispute can only be resolved by the Tribunal constituted under the Madhya Pradesh Madhyastham Adhikaran Adhiniyam, 1983. 4. Relevant facts are taken from W.P. No. 6405/2013. 5. It being a matter of fact borne out from the record that the dispute between the parties emanates from the agreement relating to Package No. 5 : Rehabilitation and Strengthening of Vidisha-Korwai Section of SH 19 [Project Road No. 11]. 6. The Agreement in question contains Arbitration Clause 67.4, which envisages - "Any dispute in respect of which : a) the decision, if any, of the Board has not become final and binding pursuant to sub-clause 67.2, and b) amicable settlement has not been reached : (i) In the case of dispute arising between the Employer and a domestic Contractor or between the Employer and a foreign Contractor who opts for the application of the Indian Arbitration and Conciliation Act, 1996 related to any matter arising out of or connected with this Contract, such disputes shall be referred to the award of two arbitrators (one each to be appointed by each party) and an Umpire to be appointed by the Arbitrators, or if there is no agreement, to be appointed by the Arbitration Committee of the Indian Council of Arbitration. The Indian Arbitration and Conciliation Act, 1996 the rules thereunder and any statutory modification or re-enactment thereof, shall apply to these arbitration proceedings; or (2) in the case of dispute arising between the Employer and a Foreign Contractor, by application of the UNCITRAL Arbitration Rules related to any matter arising out of or connected with this contract, such dispute shall be referred to the award of two Arbitrators (one each to be appointed by each party) and an Umpire to be appointed by the Arbitrators or if there is no agreement, to be appointed by the International Centre for Alternative Dispute Resolution (ICADR).
The UNCITRAL Arbitration Rules shall apply to these arbitration proceedings. (ii) Neither party shall be limited in the proceedings before the arbitrators to the evidence or arguments already put before the Engineer, for the purpose of obtaining his said decision. No such decision shall disqualify the Engineer from being called as a witness and giving evidence before the arbitrators or any matter whatsoever relevant to the dispute. (iii) The reference to arbitration may proceed notwithstanding that the Works shall not then be or be alleged to be complete, provided always that the obligations of the employer, the Engineer and the Contractor shall not be altered by reason of the arbitration being conducted during the progress of the Works. Neither party shall be entitled to suspend the works and payment to the contractor shall be continued to be made as provided by the contract. (vi) If one of the parties fail to appoint its arbitrators in pursuance of sub para (i) and (ii) above, within 60 days after receipt of the notice of the appointment of its arbitrators by the other party, then the Secretary General of the Permanent Court of Arbitration, the Hague, in the case of foreign contractors opting for the application of the UNCITRAL Arbitration Rules or the Ministry of Road Transport and Highways in the case of Indian Contractors, and the foreign contractors who opt for the application of Indian Arbitration and Conciliation Act, 1996, as the case may be, shall appoint the arbitrator. A certified copy of the Secretary General's order or Ministry of Road Transport and Highways order, as the case may be, making such an appointment shall be furnished to both the parties. (v) Arbitration proceedings shall be held at Bhopal, India and the language of the arbitration proceedings and that of all documents and communications between the parties shall be English. (vi) The decision of the majority of arbitrators shall be final and binding upon both parties. The expenses of the arbitrators as determined by the arbitrators shall be shared equally by the Employer and Contractor. However, the expenses incurred by each party in connection with the preparation, presentation shall be borne by the party itself. (vii) All arbitration awards shall be in writing and shall state the reasons for the award." 7.
The expenses of the arbitrators as determined by the arbitrators shall be shared equally by the Employer and Contractor. However, the expenses incurred by each party in connection with the preparation, presentation shall be borne by the party itself. (vii) All arbitration awards shall be in writing and shall state the reasons for the award." 7. Acting thereupon and in order to resolve the dispute and having failed to resolve the dispute amicably, petitioner invoked the Arbitration Clause and vide communication dated 20.7.2010, nominated an Arbitrator. Respondents, responding to the communication, appointed their Arbitrator vide communication dated 3.8.2010. A Presiding Officer to complete the quorum was appointed on 8.8.2010. The statement of claim was filed on 17.2.2011 and its counter was filed by the respondent on 16.5.2011. The proceedings were commenced. In the process of hearing, respondent came up with an application under Section 16 of the 1996 Act. Contending inter alia that contract being a works contract, the jurisdiction lay with the Tribunal constituted under the M.P. Madhyastham Adhikaran Adhiniyam, 1983 (hereinafter referred to as 1983 Adhiniyam'). The application came to be rejected on 23.6.2012 overruling the objection as to jurisdiction. Consequent whereof, the Tribunal continued with the arbitral proceedings as per the provisions envisaged under Section 16(5) of 1996 Act and the respondent-objector were left with the remedy under Section16(6), which stipulates - "A party aggrieved by such an arbitral award may make an application for setting aside such an arbitral award in accordance with section 34". 8. The respondents, instead of waiting till Award was to be passed, took recourse to Section 14(2) of 1996 Act for termination of the mandate of the Tribunal in view of the decision of the Supreme Court in M.P. Rural Road Development Authority v L.G. Chaudhary Engineers and Contractor : (2012) 3 SCC 495 ; wherein, it has been held that the dispute pertaining to works contract could be adjudicated and resolved under 1983 Adhiniyam. The application though opposed at, yet the trial Court went on to allow the application by terminating the authority of the arbitral Tribunal constituted under 1996 Act. 9.
The application though opposed at, yet the trial Court went on to allow the application by terminating the authority of the arbitral Tribunal constituted under 1996 Act. 9. The issue, in these given facts, which arises for consideration is whether it is within the jurisdiction of the Court under Section14(2) to have terminated the authority, when earlier the Tribunal has ruled in favour of continuation of the proceedings, by rejecting the application under Section 16(2) of 1996 Act. Sub-section (2) of Section 16 of 1996 Act envisages that - (2) A plea that the arbitral tribunal does not have jurisdiction shall be raised not later than the submission of the statement of defence; however, a party shall not be precluded from raising such a plea merely because that he has appointed, or participated in the appointment of, an arbitrator. 10. Apparently, the objection as to jurisdiction has to be raised before filing of defence. 11. In the case at hand, evidently, the arbitral proceeding have advanced to the stages of hearing. 12. While dwelling on the aspect as to whether it is permissible to take such objection when the stage has crossed, it has been held by the Supreme Court in M/s. MSP Infrastructure Ltd. v M.P. Road Development Corporation Ltd. : Civil Appeal No. 10778/2014 (arising out of SLP (Civil) No. 16539/2010 decided on 5.12.2014 that - "a party is bound, by virtue of sub-section (2) of Section16, to raise any objection it may have to the jurisdiction of the Tribunal before or at the time of submission of its statement of defence, and at any time, thereafter, it is expressly prohibited. 13. It is further held by their Lordships - "16. It was next contended on behalf of the Respondent by Shri Divan, that Section 16 undoubtedly empowers the Tribunal to rule on its own jurisdiction and any objections to it must be raised not later than the submission of the statement of defence. However, according to the learned senior counsel, objections to the jurisdiction of a Tribunal may be of several kinds as is well-known, and Section 16 does not cover them all.
However, according to the learned senior counsel, objections to the jurisdiction of a Tribunal may be of several kinds as is well-known, and Section 16 does not cover them all. It was further contended that where the objection was of such a nature that it would go to the competence of the Arbitral Tribunal to deal with the subject matter of arbitration itself and the consequence would be the nullity of the award, such objection may be raised even at the hearing of the petition under Section 34 of the Act. In support, the learned senior counsel relied on clause (b) of sub-section (2) of Section 34 which reads as follows:- "34(2) An arbitral award may be set aside by the Court only if - (a)... (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. It is not possible to accept this submission. In the first place, there is nothing to warrant the inference that all objections to the jurisdiction of the Tribunal cannot be raised under Section 16 and that the Tribunal does not have power to rule on its own jurisdiction. Secondly, Parliament has employed a different phraseology in Clause (b) of Section 34. That phraseology is "the subject matter of the dispute is not capable of settlement by arbitration." This phrase does not necessarily refer to an objection to 'jurisdiction' as the term is well known. In fact, it refers to a situation where the dispute referred for arbitration, by reason of its subject matter is not capable of settlement by arbitration at all. Examples of such cases have been referred to by the Supreme Court in the case of Booz Allen and Hamilton Inc. Vs. SBI Home Finance Limited and Ors.[1] This Court observed as follows:- "36.
Examples of such cases have been referred to by the Supreme Court in the case of Booz Allen and Hamilton Inc. Vs. SBI Home Finance Limited and Ors.[1] This Court observed as follows:- "36. The well-recognised examples of non-arbitrable disputes are: (i) disputes relating to rights and liabilities which give rise to or arise out of criminal offences; (ii) matrimonial disputes relating to divorce, judicial separation, restitution of conjugal rights, child custody; (iii) guardianship matters; (iv) insolvency and winding-up matters; (v) testamentary matters (grants of probate, letters of administration and succession certificate); and (vi) eviction or tenancy matters governed by special statutes where the tenant enjoys statutory protection against eviction and only the specified courts are conferred jurisdiction to grant eviction or decide the disputes." The scheme of the Act is thus clear. All objections to jurisdiction of whatever nature must be taken at the stage of the submission of the statement of defence, and must be dealt with under Section 16 of the Arbitration Act, 1996. However, if one of the parties seeks to contend that the subject matter of the dispute is such as cannot be dealt with by arbitration, it may be dealt under Section 34 by the Court. 17. It was also contended by Shri Divan, that the newly added ground that the Tribunal under the Arbitration Act, 1996 had no jurisdiction to decide the dispute in question because the jurisdiction lay with the Tribunal under the M.P. Act of 1983, was a question which can be agitated under sub-clause (ii) of clause (b) of sub-section (2) of Section 34 of the Arbitration Act, 1996. This provision enables the court to set- aside an award which is in conflict with the public policy of India. Therefore, it is contended that the amendment had been rightly allowed and it cannot be said that what was raised was only a question which pertained to jurisdiction and ought to have been raised exclusively under Section 16 of the Arbitration Act, 1996, but in fact was a question which could also have been raised under Section 34before the Court, as has been done by the Respondent. This submission must be rejected.
This submission must be rejected. The contention that an award is in conflict with the public policy of India cannot be equated with the contention that Tribunal under the Central Act does not have jurisdiction and the Tribunal under the State Act, has jurisdiction to decide upon the dispute. Furthermore, it was stated that this contention might have been raised under the head that the Arbitral Award is in conflict with the public policy of India. In other words, it was submitted that it is the public policy of India that arbitrations should be held under the appropriate law. It was contended that unless the arbitration was held under the State Law i.e. the M.P. Act that it would be a violation of the public policy of India. This contention is misconceived since the intention of providing that the award should not be in conflict with the public policy of India is referable to the public policy of India as a whole i.e. the policy of the Union of India and not merely the policy of an individual state. Though, it cannot be said that the upholding of a state law would not be part of the public policy of India, much depends on the context. Where the question arises out of a conflict between an action under a State Law and an action under a Central Law, the term public policy of India must necessarily understood as being referable to the policy of the Union. It is well known, vide Article 1 of the Constitution, the name 'India' is the name of the Union of States and its territories include those of the States. 18. We have thus no hesitation in coming to the conclusion that the amendment application raised a ground which was contrary to law and ought not to have been allowed by the High Court. We accordingly set aside the judgment and order of the High Court. There shall be no order as to costs." 14. This verdict leaves no iota of doubt that where an objection as to jurisdiction of the Tribunal is not raised before filing the defence, the objector is precluded from raising an objection at a later stage. 15.
We accordingly set aside the judgment and order of the High Court. There shall be no order as to costs." 14. This verdict leaves no iota of doubt that where an objection as to jurisdiction of the Tribunal is not raised before filing the defence, the objector is precluded from raising an objection at a later stage. 15. Though, learned counsel for the respondents have tried to distinguish the judgment on the ground that the respondent had sought the revocation of authority of the Arbitrator based on the decision in L.G. Chaudhary (supra) under clause (a) of sub-section (1) of Section 14 of 1996 Act which states that the mandate of an arbitrator shall terminate if "he becomes de jure or de facto unable to perform his functions or for other reasons fails to act without undue delay". 16. The question is will a declaration of law that a 'works contract' invariably must be arbitrated by the Tribunal constituted under 1983 Adhiniyam, would make an Arbitration Tribunal constituted under 1996 Act de jure or de facto unable to perform the functions. 17. In the given facts of the present case, the simple answer is 'No'. 18. As the authority in Arbitrator has emanated from the Agreement entered into between the parties who despite of being conscious of the fact that a 'works contract' is being entered into yet, have chosen forum under 1996 Act. Such an agreement being not against a public policy is not hit by the verdict in L.G. Chaudhary (supra) which decides as to what would be the forum for resolving the dispute as to works contract but does not hold that an agreement entered into between the parties consciously choosing a forum, is contrary to public policy. 19. It has been held in Indian Oil Corporation Limited v Raja Transport Private Limited : (2009) 8 SCC 520 that 'Arbitration' is a binding voluntary alternative dispute resolution process by a private forum chosen by the parties. It has been further held - "14. No party can say he will be bound by only one part of the agreement and not the other part, unless such other part is impossible of performance or is void being contrary to the provisions of the Act, and such part is severable from the remaining part of the agreement.
It has been further held - "14. No party can say he will be bound by only one part of the agreement and not the other part, unless such other part is impossible of performance or is void being contrary to the provisions of the Act, and such part is severable from the remaining part of the agreement. The arbitration clause is a package which may provide for what disputes are arbitrable, at what stage the disputes are arbitrable, who should be the arbitrator, what should be the venue, what law would govern the parties etc. A party to the contract cannot claim the benefit of arbitration under the arbitration clause, but ignore the appointment procedure relating to the named Arbitrator contained in the arbitration clause." 20. In the instant case, having suffered rejection of an application under Section 16(2) of 1996 Act, the remedy with the respondent lay under sub-section (6) of Section 16. Instead, the respondent took recourse to filing of an application under Section 14(2) of 1996 Act for revocation of the authority of the arbitrator on the anvil of decision in L.G. Chaudhary (supra); which, in the considered opinion of this Court, was not tenable as the judgment did not render appointment of arbitrator which was in consonance with the agreement as a nullity or against a public policy. 21. Viewed thus, the application under Section 14(2) of 1996 Act was not tenable. Therefore, the impugned order cannot be given the stamp of approval. 22. Consequently, the order in question is hereby set aside. The matter is relegated to the Arbitrator for an early decision on the dispute referred. 23. In the result, the petitions are allowed to the extent above. No costs. 24. Let a copy of this order be retained in the connected petition. 25. Certified copy as per rules.