Industries Ltd. Vs. M/S Godrej & Boyce Mfg. Co. Ltd. & Anr  Insc
127 (26 February 2004)
Pal & P.Venkatarama Reddi.
out of SLP (C) No. 16339/2003) RUMA PAL, J.
appeal has been preferred from an interim order granted by the Division Bench
of the Bombay High Court staying the arbitration proceedings before the Uttar
Pradesh Industry Facilitation Council (referred to as 'the Council') set up
under the Interest on Delayed Payments to Small Scale and Ancillary Industrial
Undertakings Act, 1993(referred to as 'the Act').
not concerned with the merits of the proceedings initiated by the appellant
before the Council. The only question is whether the High Court had the
jurisdiction to pass the impugned order.
chronology of events which are relevant for the purposes of this appeal,
commenced with a notice dated 11th September 2001 served by the appellant on the respondent raising a demand. The notice
also contained the following paragraph:
may also treat this as a notice under the provisions of the 'Interest on
Delayed Payments to Small Scale and Ancillary Industrial Undertakings Act,
1993'. Failure or non-payment will force us to move our claims as mentioned
above to the appropriate authorities for recovery of our dues as mentioned
above." In October, 2001 the appellants filed a claim petition before the
Council. The Council forwarded the claim petition to the respondent No. 1 under
cover of its letter dated 27th December 2001 asking the respondent No. 1 to respond to the same within a period of
one month. The receipt of the claim petition was acknowledged by the respondent
by letter dated 25th
January 2002 and
requested for time to submit its reply by six weeks. The prayer for extension
of time was, however, made without prejudice to the respondent's "legal
rights and contentions relating to the impugned notice dated 27th December and
the claim purported to be made under Section 6 of the said Act".
On 12th February 2002 the respondent No. 1 filed a suit in
the City Civil Court at Bombay against the appellant who was named as the defendant No. 1
and the Council which was named as the defendant No. 2. The prayers in the
plaint are, inter-alia, for a declaration that the claim petition filed by the
appellant before the Council was ultra-vires the provisions of the Act and,
therefore, illegal, null and void. A permanent order of injunction was also
asked for restraining further proceedings before the Council. An application
was filed in the suit for interim relief by the respondent No. 1. By an order
dated 5th February 2002 the City Civil Court granted an ad- interim injunction staying the proceedings
under the Act. The application for interim relief was, however, ultimately
dismissed by the City Civil Court on 28th November 2002 principally on the
ground that the claim had been filed by the appellant under Section 6(2) read
with Section 8(1) of the Arbitration and Conciliation Act, 1996 (which we will
refer to as the 1996 Act) and in view of Section 5 of the 1996 Act no Court
could intervene in arbitration proceedings except to the extent prescribed
under the 1996 Act. According to the City Civil Court, the reliefs claimed for the respondent No. 1 in its suit
did not fall within the ambit of those situations where interference by Court
was permissible and consequently the Court had no jurisdiction to stay the
proceedings before the Council.
respondent No. 1 preferred an appeal from the decision of the City Civil Court before the High Court. The appeal
is pending. On an application for interim relief filed by the respondent No. 1
pending the appeal, the High Court by its order dated 21st January 2003 stayed the proceedings before the
Council only on the ground that no notice had been served by the appellant on
the respondent No. 1 under Section 21 of the 1996 Act. The High Court rejected
the appellant's application for expediting the appeal on 2nd May 2003. Both these orders of the High
Court are questioned before us in these appeals.
6 of the Act provides as follows:
of amount due
The amount due from a buyer, together with the amount of interest calculated in
accordance with the provisions of Sections 4 and 5 shall be recoverable by the
supplier from the buyer by way of a suit or other proceedings under any law for
the time being in force.
Notwithstanding anything contained in sub-section (1), any party to a dispute
may make a reference to the Industry Facilitation Council for acting as an
arbitrator or conciliator in respect of the matters referred to in that sub-
section and the provisions of the Arbitration and Conciliation Act 1996 (26 of
1996) shall apply to such disputes as if the arbitration or conciliation were
pursuant to an arbitration agreement referred to in sub-section (1) of section
7 of that Act.
(2) of Section 6 expressly incorporates the provisions of the 1996 Act. Apart
from such express incorporation, sub-section (2) of Section 6 goes further and
creates a legal fiction whereby disputes referred are to be deemed to have been
made pursuant to an arbitration agreement as defined in Section 7 of
sub-section (1) of the 1996 Act.
of the provisions of the 1996 Act into Section 6(2) of the Act has also been
effected by sub-sections (4) and (5) of Section 2 of the 1996 Act which say:
This Part except sub-section (1) of section 40, sections 41 and 43 shall apply
to every arbitration under any other enactment for the time being in force, as
if the arbitration were pursuant to an arbitration agreement and as if that
other enactment were an arbitration agreement, except in so far as the
provisions of this Part are inconsistent with that other enactment or with any
rules made thereunder.
Subject to the provisions of sub- section (4), and save in so far as is
otherwise provided by any law for the time being in force or in any agreement
in force between India and any other country or countries, this Part shall
apply to all arbitrations and to all proceedings relating thereto".
added)) The "Part" referred to in this sub-section is Part I of the
1996 Act which deals with domestic arbitrations. The proceedings before the
Council, therefore, are proceedings under the 1996 Act, pursuant to a deemed
agreement between the parties to the dispute. With the applicability of Part I
of the 1996 Act in all its force, the extent of judicial intervention in
arbitrations is limited by the non-obstante provisions of Section 5 of the 1996
Act, which stipulate: "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". The City Civil Court was right in its approach when it
said that the Court could only intervene in respect of matters expressly
provided for in the 1996 Act. The validity of the proceedings before the
Arbitral Tribunal is an issue which the Council, and not the Court, could
decide under Section 16 of the 1996 Act. Sub- section (1) of Section 16 opens
with the words "The Arbitral Tribunal may rule on its jurisdiction...".
been held by this Court that the Arbitral Tribunal's authority under Section 16
is not confined to the width of its jurisdiction but goes to the very root of
its jurisdiction. (Konkan Railways Corporation Ltd. V. Rani Construction Pvt.
Ltd. 2002 (2) SCC 388).
the Council can go into the question whether its authority had been wrongly
invoked by the appellant and it is open to it to hold that it had no
jurisdiction to proceed with the matter.
arguments which have been raised before us by the learned counsel on behalf of
the respondent to a large extent related to the merits of the appellant's claim
before the Council.
regard to the scope of the authority of the Arbitral Tribunal under Section 16,
this is not a matter which the Court can adjudicate upon. Indeed it is
incumbent on the Court to refer the parties to arbitration under Section 8(1)
of the 1996 Act if a suit is filed in a matter which is the subject matter of
an arbitration agreement. Furthermore, even while this question is pending
decision before a Court, the Arbitral Tribunal may proceed with the arbitration
under Section 8(3) and make its award. The High Court could not, therefore,
have stayed the proceedings before the Council.
also unable to accept the submission of the respondent No. 1 that Section 16 of
the 1996 Act does not apply to the present case because the reference is a
statutory one. The decision relied upon by the respondent No. 1 in support of
this submission, namely, Rohtas Industries Ltd. and Another V. Rohtas
Industries Staff Union and Others 1976 (2) SCC 82 related to a voluntary
reference of an industrial dispute under Section 10A of the Industrial Disputes
Act. Section 10A of the Industrial Disputes Act, 1947 permits the employer and
the workmen to agree to refer the dispute to the arbitration to a Labour Court or a Tribunal for adjudication
"where any industrial dispute exists or is apprehended".
if there was no such industrial dispute there could be no arbitral reference.
This Court therefore held that the disputes spilt 'into areas where the
arbitrator deriving authority under Section 10A has no jurisdiction". The
provisions of Section 10A are entirely different from the provisions of Section
16 of the 1996 Act. There is in this case, no question of dispute spilling into
areas where the Arbitral Tribunal does not have jurisdiction. Under the 1996
Act, the Arbitral Tribunal has been given a very wide and deep area of
operation and it is the Court's powers which have been statutory curtailed.
brings us to the ground on which the High Court stayed the proceedings before
the Council, namely, the alleged failure of the appellant to serve notice under
Section 21 of the 1996 Act. The point was not raised before the High Court at
all by the respondent No. 1. This was candidly stated by the learned counsel
for the respondent No. 1. Our attention was not drawn to any other legal
proceeding which requires a notice to be given prior to commencing proceedings
apart from Section 21 of the 1996 Act. Whether the notice was a notice under
Section 21 and whether the giving of notice under Section 21 is to be construed
as a pre-condition to the exercise of jurisdiction by the Council are questions
which the Council will have to decide. This debate could not be a ground for
the High Court interfering with the Council's jurisdiction and staying
proceedings before it.
up: The High Court erred in staying proceedings before the Council. It had no
jurisdiction to do so.
regard to our conclusion, and as has been agreed by the parties, the appeal
before the High Court has really become infructuous. We, therefore, set aside
the decision of the High Court and treat the appeal of respondent No. 1 before
the High Court as having been decided by this order. The decision of the City Civil Court is confirmed and the appeal is
allowed with costs.