Gulbarga University Vs.
Mallikarjun S. Kodagali & ANR. [2008] INSC 1273 (1 August 2008)
Judgment
IN THE SUPREME COURT
OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. 4747 OF 2008 (Arising
out of SLP (C) No.4765 of 2005) Gulbarga University ... Appellant Versus
Mallikarjun S. Kodagali & Anr. ... Respondents
S.B. Sinha, J.
1.
Leave
granted.
2.
Application
of Section 14 of the Limitation Act, 1963 in a proceeding under Section 34 of
the Arbitration and Conciliation Act, 1996 (for short, `the Act') is in
question in this appeal which arises out of a judgment and order dated
31.1.2005 passed by the High Court of Karnataka at Bangalore in Miscellaneous
First Appeal No.717 of 2004 whereby and where under the objection filed by the
appellant herein under Section 34 of the Act was held to be barred by
limitation.
3.
Bereft
of all unnecessary details, the fact of the matter is as under :
The parties hereto
entered into a contract of construction of an indoor stadium on or about
21.5.1993. The said contract contained a clause pertaining to resolution of
dispute between the parties by the Superintending Engineer, PWD, Gulbarga
contained in clause 30 of the contract, which reads as under :
"The decision of
the Superintending Engineer of the Gulbarga Circle for the time being shall be
final, conclusive, and binding on all parties to the contract upon all
questions relating to the meaning of the specifications, designs, drawings and
instructions herein before mentioned and as to the quality of workmanship or
material used on the work, or as to any other question, claim, right, matter,
or thing whatsoever, in any way arising out of, or relating to the contract,
esigns, drawings, specifications, estimates, instructions, orders or those
conditions or otherwise concerning the works or the execution, or, failure to
execute the same, whether arising during the progress of the work, or after the
completion or abandonment thereof in case of dispute arising between the
contractor and Gulbarga University."
The parties filed
their claims and counter claims before the said authority. A purported award
was passed in terms thereof on or about 30.7.1999. However, a copy thereof was
not supplied to the respondent.
Respondent filed a
writ petition before the High Court of Karnataka for 3 issuance of a writ of
or in the nature of mandamus directing the said authority to supply it a copy
of the said award. The writ petition was filed on 17.2.2000. It was allowed by
an order dated 13.6.2000 whereby and whereunder the Superintending Engineer was
directed to furnish a copy of his decision to the respondent. Pursuant thereto,
the same was furnished on 19.8.2000.
Treating the said
award to be one made under the Act as also on the premise that no objection
thereto was filed by the appellants in the court of Principal Civil Judge
within the period prescribed for questioning the validity thereof and, thus,
became an executable decree, an execution application was filed on or about
18.9.2000. An objection thereto was filed by the appellant herein purported to
be under Section 47 of the Code of Civil Procedure. The said objection was
dismissed. A Revision Application was filed there against and by a judgment and
order dated 30.11.2001, it was held by the High Court that the said clause does
not constitute an arbitration agreement.
A special leave
petition was filed there against by the respondent and in a decision of Three
Judge Bench of this Court, since reported in Mallikarjun v. Gulbarga University
[(2004) 1 SCC 372], the decision of the High Court was reversed holding that
`clause 30' constituted an arbitration agreement. This Court, in support of the
said decision, 4 noticed an earlier decision of this Court in Bharat Bhushan
Bansal v. U.P. Small Industries Corporation Limited [(1999) 2 SCC 166], stating
:
"15. A bare
comparison of clause 30 of the contract agreement involved in the present matter
and clauses 23 and 24 involved in Bharat Bhushan Bansal case would show that
they are not identical. Whereas clause 30 of the agreement in question provides
for resolution of the dispute arising out of the contract by persons named
therein; in terms of clause 24, there was no question of decision by a named
person in the dispute raised by the parties to the agreement. The matters which
are specified under clauses 23 and 24 in Bharat Bhushan Bansal case were
necessarily not required to arise out of the contract, but merely claims
arising during performance of the contract.
Clause 30 of the
agreement in the present case did provide for resolution of the dispute arising
out of the contract by the Superintending Engineer, Gulbarga Circle, Gulbarga.
For that reason, the case relied upon by the learned counsel for the respondent
is distinguishable.
16. Once clause 30 is
constituted to be a valid arbitration agreement, it would necessarily follow
that the decision of the arbitrator named therein would be rendered only upon
allowing the parties to adduce evidence in support of their respective claims
and counter-claims as also upon hearing the parties to the dispute. For the
purpose of constituting the valid arbitration agreement, it is not necessary
that the conditions as regards adduction of evidence by the parties or giving
an opportunity of hearing to them must specifically be mentioned therein.
Such conditions, it
is trite, are implicit in the decision-making process in the arbitration
proceedings. Compliance with the principles of natural justice inheres in an
arbitration process.
5 They, irrespective
of the fact as to whether recorded specifically in the arbitration agreement or
not are required to be followed.
Once the principles
of natural justice are not complied with, the award made by the arbitrator
would be rendered invalid. We, therefore, are of the opinion that the
arbitration clause does not necessitate spelling out of a duty on the part of
the arbitrator to hear both parties before deciding the question before him.
The expression "decision" subsumes adjudication of the dispute. Here
in the instant case, it will bear repetition to state, that the disputes
between the parties arose out of a contract and in relation to matters specified
therein and, thus, were required to be decided and such decisions are not only
final and binding on the parties, but they are conclusive which clearly spells
out the finality of such decisions as also their binding nature.
17. A clause which is
inserted in a contract agreement for the purpose of prevention of dispute will
not be an arbitration agreement.
Such a provision has
been made in the agreement itself by conferring power upon the
Engineer-in-Charge to take a decision thereupon in relation to the matters envisaged
under clauses 31 and 32 of the said agreement.
Clauses 31 and 32 of
the said agreement provide for a decision of the Engineer-in- Charge in
relation to the matters specified therein. The jurisdiction of the Engineer-in-
Charge in relation to such matters are limited and they cannot be equated with
an arbitration agreement. Despite such clauses meant for prevention of dispute
arising out of a contract, significantly, clause 30 has been inserted in the
contract agreement by the parties.
18. The very fact
that clause 30 has been inserted by the parties despite the clauses for
prevention of dispute is itself a pointer to the 6 fact that the parties to
the contract were ad idem that the dispute and differences arising out of or
under the contract should be determined by a domestic tribunal chosen by
them."
Appellant thereafter
filed an application in terms of Section 34 of the Act before the Principal
Civil Court on 8.12.2003. The same was held to be barred by limitation. An
appeal preferred thereagainst by the appellant before the High Court has been
dismissed by reason of the impugned judgment, stating :
"The learned
counsel for the respondent has drawn our attention to the decision reported in
AIR 2001 SC 4010 in the case of UNION OF INDIA v. M/S POPULKAR CONSTRUCTIONS
COMPANY. In the said decision, the Apex Court has clearly laid down that the
provisions of Section 5 of Limitation Act are not applicable to an application
filed challenging the award under Section 34 and as such there was no scope for
assessing sufficiency of the cause for the delay beyond and period prescribed
in the proviso to Section 34.
In the light of this
judgment and in the facts and circumstances of the case as adverted to above,
we are of the clear view that the petition filed before the Court below under
Section 34 was clearly barred by time and the findings arrived at and conclusions
reached by the Court below while dismissing the petition on the ground, does
not call for any interference as it does not suffer from any infirmity in
law."
7 Dr. M.P. Raju,
learned counsel appearing on behalf of the appellant, would contend that the
earlier decision of this Court in Union of India v. M/s. Popular Constructions
Company [AIR 2001 SC 4010], whereupon reliance has been placed by the High
Court has since been revisited by this Court in State of Goa v. Western
Builders [(2006) 6 SCC 239], holding :
"14. The
question is whether Section 14 of the Limitation Act has been excluded by this
special enactment i.e. the Arbitration and Conciliation Act, 1996. Section 43
of the Arbitration and Conciliation Act, 1996 clearly says that the Limitation
Act, 1963 shall apply to arbitration as it applies to the proceedings in the
court.
15. Therefore,
general proposition is by virtue of Section 43 of the Act of 1996 the
Limitation Act, 1963 applies to the Act of 1996 but by virtue of sub-section
(2) of Section 29 of the Limitation Act, if any other period has been
prescribed under the special enactment for moving the application or otherwise
then that period of limitation will govern the proceedings under that Act, and
not the provisions of the Limitation Act. In the present case under the Act of
1996 for setting aside the award on any of the grounds mentioned in sub-section
(2) of Section 34 the period of limitation has been prescribed and that will
govern. Likewise, the period of condonation of delay i.e. 30 days in the
proviso.
16. But there is no
provision made in the Arbitration and Conciliation Act, 1996 that if any party
has bona fidely prosecuted its remedy before the other forum which had no 8
jurisdiction then in that case whether the period spent in prosecuting the
remedy bona fidely in that court can be excluded or not. As per the provision,
sub-section (3) of Section 34 which prescribes the period of limitation (3
months) for moving the application for setting aside the award before the court
then that period of limitation will be applicable and not the period of
limitation prescribed in the Schedule under Section 3 of the Limitation Act,
1963. Thus, the provision of moving the application prescribed in the
Limitation Act, shall stand excluded by virtue of sub-section (2) of Section 29
as under this special enactment the period of limitation has already been
prescribed. Likewise the period of condonation of delay i.e. 30 days by virtue
of the proviso.
17. Therefore, by
virtue of sub-section (2) of Section 29 of the Limitation Act what is excluded
is the applicability of Section 5 of the Limitation Act and under Section 3
read with the Schedule which prescribes the period for moving application.
18. Whenever two
enactments are overlapping each other on the same area then the courts should
be cautious in interpreting those provisions. It should not exceed the limit
provided by the statute. The extent of exclusion is, however, really a question
of construction of each particular statute and general principles applicable
are subordinate to the actual words used by legislature."
Referring to Popular
Construction (supra) and National Aluminimum Co. Ltd. v. Pressteel &
Fabrications (P) Ltd. [(2004 (1) SCC 540], it was held :
9 "25.
Therefore, in the present context also it is very clear to us that there are no
two opinions in the matter that the Arbitration and Conciliation Act, 1996 does
not expressly exclude the applicability of Section 14 of the Limitation Act.
The prohibitory provision has to be construed strictly. It is true that the
Arbitration and Conciliation Act, 1996 intended to expedite commercial issues
expeditiously. It is also clear in the Statement of Objects and Reasons that in
order to recognise economic reforms the settlement of both domestic and
international commercial disputes should be disposed of quickly so that the
country's economic progress be expedited.
The Statement of
Objects and Reasons also nowhere indicates that Section 14 of the Limitation
Act shall be excluded. But on the contrary, intendment of the legislature is
apparent in the present case as Section 43 of the Arbitration and Conciliation
Act, 1996 applies the Limitation Act, 1963 as a whole. It is only by virtue of
sub-section (2) of Section 29 of the Limitation Act that its operation is
excluded to that extent of the area which is covered under the Arbitration and
Conciliation Act, 1996. Our attention was also invited to the various decisions
of this Court interpreting sub-section (2) of Section 29 of the Limitation Act
with reference to other Acts like the Representation of the People Act or the
provisions of the Criminal Procedure Code where separate period of limitation
has been prescribed. We need not overburden the judgment with reference to
those cases because it is very clear to us by virtue of sub-section (2) of
Section 29 of the Limitation Act that the provisions of the Limitation Act
shall stand excluded in the Act of 1996 to the extent of area which is covered
by the Act of 1996. In the present case under Section 34 by virtue of
sub-section (3) only the application for filing and setting aside the award a
period has been prescribed as 3 months and delay can be condoned to the extent
of 30 days. To this extent the applicability of Section 5 of the Limitation Act
will stand excluded but there is no provision in the Act of 1996 which excludes
operation of Section 14 of the Limitation Act. If two Acts can be read
harmoniously without doing violation to the words used therein, then there is
no prohibition in doing so."
The ratio laid down
in the said decision has since been reiterated in Union of India & Anr. v.
Bhavna Engineering Co. [2007 (5) RAJ 458], stating :
"This Court in a
recent judgment rendered in 6 SCC 239, held that Section 14 of the Limitation
Act, 1963 is applicable in the Arbitration and Conciliation proceedings.
Having gone through
the various facts, we are of the view that the mistake committed by the
appellant in approaching the Madhya Pradesh High Court and the Bombay High
Court is bona fide. We, therefore, condone the delay. In the facts of this case
and in the interest of justice, we, however, think it proper that the Section
34 Application pending before the Additional District Judge, Gwalior be
transferred to the Bombay High Court. The application will be decided on merits
expeditiously. Parties are at liberty to urge all the contentions before that
Court."
There cannot be any
doubt whatsoever that in terms of sub-section (2) of Section 34 of the Act, an
arbitral award may be set aside only if 11 one of the conditions specified
therein is satisfied. Sub-section (3) of Section 34 provides for the period of
limitation within which an application under Section 34 of the Act is to be
filed. The proviso appended thereto empowers the court to entertain an
application despite expiry of the period of limitation specified therein,
namely, three months.
No provision,
however, exists as regards application of Section 14 of the Limitation Act.
This Court, as noticed hereinbefore in Western Builders opined that sub-section
(2) of Section 29 thereof would apply to an arbitration proceedings and
consequently Section 14 of the Limitation Act would also be applicable. We are
bound by the said decision. Once it is held that the provisions of Section 14
of the Limitation Act, 1963 would apply, it must be held that the learned Trial
Judge as also the High Court has committed an error in not applying the said
provisions.
The question,
however, as to whether the period spent by the appellant in prosecuting the aforementioned
proceedings should be excluded or not is a matter which must fall for decision
before the Principal Civil Court. The necessary corollary of the aforementioned
finding is that as to whether the appellant had been prosecuting, with due
diligence another proceeding or not would fall for consideration before the
Principal Civil Court.
12 The impugned
judgment of the High Court, therefore, cannot be sustained. It is set aside
accordingly. The matter is remitted to the Principal Civil Court for consideration
of the matter afresh in the light of observations made hereinbefore. The appeal
is allowed accordingly.
However, in the facts
and circumstances of this case, there shall be no order as to costs.
...............................J.
[S.B. Sinha] .
..............................J
[Cyriac Joseph]
New
Delhi;
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