BHARAT COKING COAL LTD vs. M/S. ANNAPURNA CONSTRUCTION [2008] INSC 369 (5
March 2008)
S.B. Sinha & V.S. Sirpurkar ORDER I.A. NOS. 1-2 OF 2005 IN CIVIL APPEAL NOs. 5647-5648 OF 1997 S.B.
SINHA, J :
1. Which would be the appropriate court for the purpose of filing of an
award by the arbitrator is the question involved herein.
2. The said question arises in the following circumstances:
Respondent herein admittedly was a contractor of the appellant.
Disputes and differences having arisen between the parties, the arbitration
agreement was invoked. An arbitrator was appointed.
The parties hereto raised their claims and counter-claims before the
arbitrator. He made an award of Rs.18,97,729.37 in favour of the respondent.
3. A question of law was raised when the matter ultimately came up before
the court arising out of the proceedings for making the said award a rule of
the court, and this Court in its judgment dated 29.08.2003 [since reported in
(2003) 8 SCC 154], while setting aside the award, directed:
"40. However, as noticed hereinbefore, this case stands on a different
footing, namely, that the arbitrator while passing the award in relation to
some items failed and/or neglected to take into consideration the relevant
clauses of the contract, nor did he take into consideration the relevant
materials for the purpose of arriving at a correct fact. Such an order would
amount to misdirection in law.
41. We are, therefore, of the opinion that the matter requires
reconsideration. Having regard to the facts and circumstances of this case and
particularly keeping in view the fact that the matter relates to pure
interpretation of document which gives rise to question of law and in stead and
in place of remitting the matter to the named arbitrator, we would direct that
the disputes in relation to Claim Items 3, 7 and 11 be referred to the Hon'ble
Mr Justice D.N. Prasad, a retired Judge of the Jharkhand High Court on such
terms and conditions as may be mutually agreed upon by the parties. The learned
arbitrator is requested to consider the desirability of making his award as
expeditiously as possible keeping in view the fact that the matter has been
pending for a long time."
4. Before the learned arbitrator, three claims were raised by the
respondent, viz., Claim Item Nos. 3, 7 and 11. Claim Item No. 3 related to
extra items which has been rejected. Claim Item No. 7 related to loss of
profit. Respondent raised a claim of Rs. 27,77,714/-; an award of Rs.
12,20,289/- was made. So far as Claim Item No. 11 is concerned, which related
to the escalation of materials, an award of Rs. 90,005/- was made. It appears
that before the arbitrator parties agreed that the award be filed before this
Court.
However, an objection has been filed by the appellant wherein inter alia the
jurisdiction of this Court to entertain the objection filed under the
Arbitration Act, 1940 (for short "the 1940 Act") has been questioned.
5. Indisputably, the 1940 Act will apply in this case.
6. Section 2(c) of the 1940 Act read as under:
2. In this Act, unless there is anything repugnant in the subject or
context, - *** *** *** ''Court'' means a Civil Court having jurisdiction to
decide the questions forming the subject-matter of the reference if the same
had been the subject- matter of a suit, but does not except for the purpose of
arbitration proceedings under Section 21 include a Small Cause Court;
7. Although strictly, it is not necessary but we may also notice the change
in the definition of the term "court" brought in by the Parliament in Arbitration
and Conciliation Act, 1996 as contained in Section 2(1)(e) therein which
reads as under:
2. (1) In this Part, unless the context otherwise requires, - *** ***
*** (e) "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;
8. It is now a trite law that whenever a term has been defined under a
statute, the same should ordinarily be given effect to. There cannot, however,
be any doubt whatsoever that the interpretation clause being prefaced by the
words "unless there is anything repugnant in the subject and context"
may in given situations lead this Court to opine that the legislature intended
a different meaning. [See State of Maharashtra v. Indian Medical Association
and Others (2002) 1 SCC 589 and Pandey & Co. Builders (P) Ltd. v. State of
Bihar and Another (2007) 1 SCC 467]
9. While determining such a question, the court ordinarily again must
preserve the right of a party to prefer an appeal. A right of appeal is a
valuable right and unless there exist cogent reasons, a litigant should not be
deprived of the same. It is a statutory right.
10. With the aforementioned background, we may notice a few precedents
operating in the field.
In State of Madhya Pradesh v. M/s. Saith and Skelton (P) Ltd. [(1972) 1 SCC
702], apart from appointing the arbitrator, this Court extended the time for
making the award. It was held that this Court would be entitled to entertain an
application under Section 14(2) read with Section 30 of the 1940 Act stating:
"18. According to Mr Shroff the Award should have been filed, not in
this Court, but in the Court of the Addl. District Judge, Mandsaur, as that is
the Court which will have jurisdiction to entertain the suit regarding the
subject-matter of the reference. We are not inclined to accept this contention
of Mr Shroff. It should be noted that the opening words of Section 2 are
"In this Act, unless there is anything repugnant in the subject or
context". Therefore the expression "Court" will have to be
understood as defined in Section 2( c ) of the Act, only if there is nothing
repugnant in the subject or context. It is in that light that the expression
"Court" occurring in Section 14(2) of the Act will have to be
understood and interpreted.
It was this Court that appointed Shri V.S. Desai, on January 29, 1971, by
consent of parties as an arbitrator and to make his Award. It will be seen that
no further directions were given in the said order which will indicate that
this Court had not divested itself of its jurisdiction to deal with the Award
or matters arising out of the Award. In fact the indications are to the
contrary. The direction in the order, dated January 29, 1971, is that the
arbitrator is "to make his Award". Surely the law contemplates
further steps to be taken after the Award has been made, and quite naturally
the forum for taking the further action is only this Court. There was also direction
to the effect that the parties are at liberty to apply for extension of time
for making the Award. In the absence of any other court having been invested
with such jurisdiction by the order, the only conclusion that is possible is
that such a request must be made only to the court which passed that order,
namely, this Court."
It was furthermore observed:
"21. in Ct. A. Ct. Nachiappa Chettiar v. Ct. A. Ct.
Subramaniam Chettiar the question arose whether the trial court had
jurisdiction to refer the subject- matter of a suit to an arbitrator when the
decree passed in the suit was pending appeal before the High Court. Based upon
Section 21, it was urged before this Court that the reference made by the trial
court, when the appeal was pending, and the award made in consequence of such
reference, were both invalid as the trial court was not competent to make the
order of reference. This Court rejected the said contention and after a
reference to Sections 2( c ) and 21 of the Act held that the expression
"Court" occurring in Section 21 includes also the appellate court,
proceedings before which are a continuance of the suit. It was further held
that the word "suit" in Section 21 includes also appellate
proceedings. In our opinion, applying the analogy of the above decision, the
expression "Court" occurring in Section 14(2) of the Act will have to
be understood in the context in which it occurs. So understood, it follows that
this Court is the Court under Sect ion 14(2) where the arbitration Award could
be validly filed."
11. The said principle was reiterated in M/s. Guru Nank Foundation v.
M/s. Rattan Singh and Sons [(1981) 4 SCC 634] wherein it was opined:
"18By the decision of this Court in the appeal the 2nd respondent was
removed as arbitrator and the 3rd respondent was appointed as sole arbitrator.
Indisputably, therefore, the arbitrator was appointed by this Court. The order
appointing the 3rd respondent as arbitrator gave a further direction that the
arbitrator shall enter upon the reference within 15 days from the date of the
Order of the Court and he should try to dispose of the same as expeditiously as
possible. The final Order was that the appeal was disposed of in terms
hereinabove indicated. A contention that thereafter this Court was not in
seisin of the matter was urged relying upon the fact that the appeal was
disposed of by the Order of the Court and that there was no further proceeding
before this Court. This contention has merely to be stated to be rejected, as
will be presently pointed out. After the disposal of the appeal, CMP No. 896 of
1977 was presented to this Court for clarification and/or modification of the
Order of the Court dated January 5, 1977.
This Court by its Order dated February 10, 1977, gave further directions and
a specific time-limit was fixed by this Court directing the 3rd respondent as
arbitrator to conclude the proceedings within four months from the date of
Order of the Court. Even with regard to the conduct of proceedings this Court
directed that the 3rd respondent should proceed with the reference from the
stage where it was left by the 2nd respondent and that not only that he may
permit additional evidence to be led but he must consider the pleadings and
evidence already placed before the previous arbitrator. This will indisputably
show that this Court had complete control over the proceedings before the
arbitrator."
12. Both the aforementioned decisions, therefore, proceed on the basis that
the court had complete control over the proceedings of the arbitrator. In the
instant case, however, the matter came up before this Court whence an
arbitrator had already been appointed and an award had been made. An arbitrator
was appointed by this Court while setting aside the said award particularly in
view of the fact that construction of the contract was in question. The court
did not and could not retain any control over the proceedings of the
arbitrator.
13. Thus, a distinction must be borne in mind in a case where this Court had
no control over the proceedings and the case in which control of proceedings of
the arbitrator had been retained. In the former case, having regard to the
definition of the term "court" as contained in Section 2(c) of the
1940 Act, award must be filed before a court which has the requisite
jurisdiction thereover.
14. We may notice that such a view has been taken by this Court in National
Aluminium Co. Ltd. v. Pressteel & Fabrications (P) Ltd. and Another [(2004)
1 SCC 540] stating:
"9In regard to the forum before which the application for modification
or setting aside the award is concerned, we find no difficulty in coming to the
conclusion that in view of the provisions of Section 34 read with Section 2( e
) of the 1996 Act it is not this Court which has the jurisdiction to entertain
an application for modification of the award and it could only be the principal
civil court of original jurisdiction as contemplated under Section 2( e ) of
the Act, therefore, in our opinion, this application is not maintainable before
this Court."
15. Yet again in State of Goa v. Western Builders [(2006) 6 SCC 239], this
Court opined:
"21. In National Aluminium Co. Ltd. v. Pressteel & Fabrications (P)
Ltd. unilateral appointment of the arbitrator under the Arbitration Act,
1940 was challenged. This Court in the said appeal after hearing the
parties appointed a sole arbitrator.
Before the sole arbitrator both the parties by consent agreed that the
proceedings should be governed by the provisions of the Arbitration and Conciliation
Act, 1996. The arbitrator proceeded on that basis and gave a final award.
That final award was challenged. The question arose whether the proceeding
shall be governed by the 1940 Act or by the 1996 Act? And which is the
appropriate court. The dispute prolonged for nearly 16 years.
This Court dismissed the appeal and held that in the present case proceedings
should go on under the provisions of the Act, 1996 though the dispute arose
prior to coming into force of the Act, 1996, the appropriate forum for
challenging the award under Section 34 was the Principal Civil Court of
original jurisdiction as contemplated under Section 2( e ) of the Act,
1996."
16. Ordinarily, although there may be cases to the contrary, the principle
that the right of appeal should not be taken away, should be applied. There
might be strong reason to deny the suitor a right of appeal.
17. In Pandey & Co. Builders (P) Ltd (supra), however, in the fact
situation obtaining therein, this Court held :
"23. In this case, it is not necessary for us to go into the question
as to whether sub-section (3) of Section 37 of the 1996 Act would debar an
appeal from appellate order passed under sub-section (2) of Section 37 thereof.
The consequences of the statutory embargo would ensue but then the question
will have to be considered as and when occasion arises therefor. Sub-section
(2) of Section 37 of the 1996 Act prescribes for an appeal to a court. We do
not see any reason as to why having regard to its plain l anguage, the
definition of "court" shall not be put into service. It may be true
that the interpretation clause provides for "unless the context otherwise
requires". If application of the interpretation clause contained in
Section 2 of the 1996 Act shall lead to anomalous and absurd results, one may
not stick to the definition but we do not think that such a case has been made
out."
18. Reliance has also been placed by Mr. Ajit Kumar Sinha, learned counsel
appearing on behalf of the appellant on an order of this Court dated 22.08.1997
in M/s. Bharat Coking Coal Ltd. v. H.P. Biswas & Company [Civil Appeal No.
3504 of 1992] wherein it was directed:
"In this civil appeal an award has been filed by the Arbitrator
appointed by this Court in a proceeding arising out of Section 8 of the Arbitration Act
before the trial Court. However, as the appeal arises out of the proceeding
under the aforesaid section before the trial court, the appointment of the
arbitrator by this Court was in substitution of the earlier order passed by the
Trial Court. Hence the appropriate court in which the award is to be filed will
be the Court of First Sub-Judge, Dhanbad. Therefore, the Registry is directed
to send the original award as well as the entire records to the First
Sub-Judge, Dhanbad, Bihar.
On receipt of copy of this Order, original award and the records by the
trial court, notice will be issued to the parties concerned by the trial court
and within 30 days of receipt of such notice objection, if any, under Section
30 of the Arbitration
Act will be filed by the concerned objector. Thereafter the trial court
will proceed further in accordance with law. The trial court shall decide the
objections, if any, of the parties concerned to the request for making the
award a rule of the court. The trial court will dispose of the proceedings at
an early date preferably within a period of six months from today"
19. A Similar opinion was rendered yet recently by a Bench of this Court in
Garhwal Mandal Vikas Nigam Ltd. v. M/s. Krishna Travel Agency [IA 1 & 2 in
SLP (C) No. 18344 of 2004 dated 24.01.2007] wherein it was held:
"Apart from these four cases, which have been brought to our notice,
the position of law is very clear that in case the argument of learned counsel
is accepted, that would mean that in every case where this court passes an
order, be it on appeal, from the order passed by the High Court under Section
11(6) of the Arbitration
and Conciliation Act, 1996,
this court will become a Principal Civil Court of original jurisdiction. If the
argument is further taken to its logical conclusion that would mean that the
parties will have to approach this Court by making an application under Section
34 i.e. for setting aside the award. The expression 'Court' used in Section 34
of the Act will also have to be understood ignoring the definition of 'Court'
in the Act. There is another facet of the problem. The party will be deprived
of the right to file an appeal under Section 37(i)(b) of the Arbitration and
Conciliation Act. This means that a valuable right of appeal will be lost.
Therefore, in the scheme of things, the submission of the learned counsel
cannot be accepted..."
[See also the comments in 'Arbitration, Conciliation and Mediation', Second
edition by Shri V.A. Mohta, page 82]
20. It is also not a case where this Court has exercised its jurisdiction
under Sub-section (6) of Section 11 of the Arbitration and
Conciliation Act, 1996 as was
done in Mcdermott International Inc. v. Burn Standard Co. Ltd.
and Others [(2005) 10 SCC 353]. A similar view has been taken in ITC Ltd. v. George Joseph Fernandes and Another [(2005) 10 SCC 425].
21. As the question of jurisdiction of a Court is involved herein, we are of
the opinion, by consent of the parties also, jurisdiction cannot be assumed by
this court.
22. We, therefore, for the foregoing reasons as also the binding precedents
are of the opinion that this Court has no jurisdiction to entertain these applications.
The Registry, therefore, is directed to send the records to the Court of
District Judge, Dhanbad who in turn is directed to transfer the case to a court
having appropriate jurisdiction. The court concerned is requested to dispose of
the objection filed by the appellant herein as expeditiously as possible and
not later than three months from the date of receipt of records.
23. The applications are disposed of with the aforementioned directions. No costs.
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