Civil Application No. 7528 of 2004 · Gujarat High Court

directing the parties to attend for a preliminary hearing on 27.5.2003 and the matter was adjourned to 11.8.2003 for filing claim statement and reply thereto and for admission/denial of documents. It is the case of the petitioner SCL that in the meantime the Labour and Employment Department of Government of Gujarat by Notification dated 5.6.2003 declared the SCL to be a Relief Undertaking under the BRU Act and according to the petitioner considering Section 4 of the BRU Act the rights, privileges, obligations and liabilities (other than those liabilities etc., towards its employees) occurred or incurred before 5th June 2003 and any remedy for enforcement thereof is required to be suspended and the proceedings relating thereto pending before any Court, Tribunal, Officer or Authority is required to be stayed during one year commencing from 5th June 2003 and ending on 4th June 2004 and that thereafter the said notification has been renewed till 4.6.2005. It is the case of the petitioner of Special Civil Application No. 7528 of 2004, i.e., SCL that they preferred an application under Section 16 of the Arbitration Act before the learned Sole Arbitrator stating that pursuant to the scheme of arrangement between Birla VXL and SCL all liabilities of Chemical Division of Birla VXL came to be vested in the petitioner and the DLF ought to have sent the notice invoking arbitration to the SCL. The primary and mandatory requirement of the Arbitration Act was not challenged by DLF and thus arbitral proceedings before the respondent No.1 Sole Arbitrator were not maintainable against SCL. It also appears from the record that SCL also preferred an application under Section 20 of the Arbitration Act for change of venue of arbitration to Porbandar in terms of Clause 15 of the purchase orders as the arbitration proceedings were being conducted at New Delhi. The petitioner SCL also preferred an application under Section 16 of the Arbitration Act for stay of arbitral proceedings in view of the fact that SCL being declared as a Relief Undertaking under the BRU Act. The learned Sole Arbitrator rejected all the above three applications by its order dated 20.5.2004 and therefore the petitioner has preferred the Special Civil Application under Article 226 of the Constitution of India for the aforesaid reliefs.

6.1.(cid:9)It appears from the record of Special Civil Application No. 9710 of 2004 that petitioner of the said Special Civil Application Birla VXL also moved an application under Section 16 of the Arbitration Act before the Sole Arbitrator for a declaration that there is no existing arbitration agreement between Birla VXL and DLF and that in absence of any arbitration agreement between Birla VXL and DLF the learned Sole Arbitrator does not have any jurisdiction relating to the present arbitration proceedings qua Birla VXL and it was further prayed to delete Birla VXL's name from the array of parties with regard to claim filed by DLF and it is also further prayed for rejection of DLF's claim against Birla VXL. The aforesaid application and the prayer was made by Birla VXL contending inter alia that in view of sanction of the scheme by this Court demerging the Chemical Division of Birla VXL and transferring the Chemical Division of Birla VXL to SCL all assets and liabilities of the Chemical Division came to be transferred to SCL and with the sanction of the scheme of demerger between Birla VXL and SCL by the Hon'ble Gujarat High Court Saurashtra Chemicals stand substituted in the contract with DLF and consequently with effect from

1.7.1998 there is no privity of contract between DLF and Birla VXL. The aforesaid application also came to be dismissed by the learned Sole Arbitrator by order dated 20th May 2004 against which the petitioner Birla VXL has preferred the present Special Civil Application No. 9710 of 2004 under Article 226 of the Constitution of India.

6.2.(cid:9)It appears from the record of Special Civil Application No. 16075 of 2003 that the dispute is between one Krupp Industries (I) Ltd and the SCL and the said Krupp Industries (I) Ltd., [hereinafter referred to as "KIL"] had entered into a contract with the SCL by Purchase Order dated 1.6.1994. As there was a dispute between the said KIL and the SCL the Arbitration Clause was invoked and late Mr. Justice N.J. Pandya (Retd.) was appointed as Sole Arbitrator; during the pendency of the arbitration proceedings between the KIL and the SCL before the Sole Arbitrator, by notification dated

5.6.2003 issued by the Labour and Employment Department, Government of Gujarat, dated 5.6.2003 the SCL came to be declared as a relief undertaking under the BRU Act which is extended upto 4.6.2005 and as according to the SCL by virtue of Section 4 of the BRU Act, rights, privileges, obligations, liabilities (other than those liabilities etc., towards its employees) occurred or incurred before 5th June 2003 any remedy for the enforcement thereof shall be suspended and proceedings relating thereto pending before any Court, Tribunal, Officer or Authority shall be stayed during one year commencing from 5th June 2003 and ending on 4th June 2004 which has been extended till 4.6.2005 the arbitration proceedings before the Sole Arbitrator was required to be stayed during the period of the said notification; and therefore the SCL submitted an application under Section 16 of the Arbitration Act before the Sole Arbitrator for staying the arbitration proceedings and the Sole Arbitrator by his order dated

23.9.2003 rejected the application of the SCL for such arbitration proceedings which is challenged by the petitioner SCL before this Court by way of present Special Civil Application No. 16075 of 2003 under Article 226 of the Constitution of India.

7.(cid:9)Heard Shri Mihir Thakore, learned Senior Advocate for M/s. Singhi & Company appearing for Saurashtra Chemicals Ltd; Shri KS Nanavati, learned Senior Advocate for M/s. Trivedi & Gupta for Birla VXL Limited; Shri M.L. Verma, learned Senior Advocate with Shri Anil Sheth for DLF Universal Limited, and Shri P.M. Thakkar, learned Senior Advocate for Krupp Industries (I) Ltd.

8.(cid:9)Shri Mihir Thakore, the learned Senior Advocate appearing on behalf of SCL has relied upon the following decisions/judgments in support of his contention and submission that a writ can lie to an Arbitrator appointed by the parties; (1) Andi Mukta Sadguru Shree Muktajeevandas Swami Suvarna Jayanti Mahotsav Smarak Trust and Others Vs. V.R. Rudani And Others, reported in (1989) 2 SCC 691; (2) ONGC Ltd. Vs. Saw Pipes Ltd, reported in (2000) 5 SCC page 705; (3) M/s. Anuptech Equipments Private Ltd. Vs. M/s. Ganpati Co-op. Housing Society Ltd., Mumbai and others, reported in AIR 1999 Bombay 219; (4) Indian Oil Corporation Limited Vs. ATV Projects India Limited and Another, reported in 2004 (2) Arbitration Law Report Page 432 (Delhi High Court); (5) Subash Singh & Co. Vs. Girnar Fibres Ltd., reported in 2000(1) Arbitration Law Report, Page 430 (Punjab & Haryana) Para 10 at Page 439.

8.1.(cid:9)Shri Thakore, learned Senior Advocate has submitted that the writ can be issued to any person or authority so long as he performs public duty irrespective of whether it is a "State" under Article 12 of the Constitution of India. Relying upon paragraphs 15, 20 and 22 of the Judgment of the Hon'ble Supreme Court in the case of Andi Mukta Sadguru Shree Muktajeevandas Swami Suvarna Jayanti Mahotsav Smarak Trust and Others Vs. V.R. Rudani And Others (Supra), it is submitted that against the order passed by the Arbitrator under the provisions of the Arbitration Act a petition under Article 226 of the Constitution of India is maintainable. It is further submitted that the Arbitral Tribunal constituted as per the provisions of the Arbitration Act owes a positive obligation towards the parties to the arbitration and such obligation is cast on the Tribunal both by contract and by statute. Relying upon Section 28(1)(a) of the Arbitration Act, it is submitted that it imposes a duty on the Arbitral Tribunal to try and decide the dispute in accordance with the substantial law for the time being in force in India and for that purpose Shri Thakore has relied upon the judgment in the case of ONGC Ltd Vs.

Saw Pipes Ltd (supra) more particularly paras 14, 15 and 31 of the said Judgment. It is therefore submitted that it is a duty cast upon an Arbitration to act within the parameters of the public policy of the Government of India. It is further submitted that an Arbitral Tribunal owes a duty under Section 28(1) of the Arbitration Act to act in accordance with the terms of the Act and any order of an Arbitrator which is contrary to the terms of the contract would be in contravention to the said provisions of the Act and thereby contrary to the public policy of India and/or against the established substantial law of India. It is also further submitted that an Arbitral Tribunal is required to adjudicate upon civil rights of the parties, which otherwise would be adjudicated upon by the Courts of India, under the relevant statutes and therefore the Arbitral Tribunal discharges a judicial function, which squarely falls within the ambit of phrase "public duty".

Section 34 and Section 37 of the Arbitration Act clearly envisage the Legislative intent that an Arbitral Tribunal being under the supervisory control of the Courts of India it cannot be contended that an Arbitral Tribunal, though appointed by the agreement between the parties, is not discharging any "public function". It is further submitted an Arbitral Tribunal owes a duty to the parties to determine whether a claim is barred by limitation under the provisions of the Limitation Act, 1963. Section 27(5) of the Act provides that persons guilty of contempt to the Arbitral Tribunal shall be subject to the like disadvantages, penalties and punishments by order of the Court on the representation of the Arbitral Tribunal as they would incur for the like offences any suits tried before the Court. It is also further submitted that apart from the public duties which an Arbitral Tribunal owes the Arbitral Tribunal also performs public functions.

For that purpose, provisions of Section 36, Section 20(2), Section 34 and Section 37 of the Arbitration Act are relied upon. It is submitted that Section 36 of the Act provides that on expiry of time for making an application to set aside an arbitral award or on rejection of such an application, the said award shall be enforced under the provisions of the Code of Civil Procedure, 1908 in the same manner as if it were a decree of the Court. It is further submitted that an Arbitral Tribunal is required to adjudicate upon the civil rights of the parties, which otherwise would be adjudicated upon by the Courts of India under the relevant statutes. Thus an Arbitral Tribunal discharges a judicial function. It is also further submitted that even otherwise the Arbitral Tribunal is under supervisory control of the Courts as defined under Section 2(1)(e) of the Arbitration Act which in turn under the appellate, revisional and supervisory jurisdiction of the High Court and consequently amenable to the writ under Article 226 of the Constitution of India.

For that purpose, Shri Thakore has also relied upon the judgment of the Bombay High Court in the case of M/s. Anuptech Equipments Private Ltd. Vs. M/s. Ganpati Co-op. Housing Society Ltd., Mumbai and others, (supra), by which the Bombay High Court has entertained the writ petition against the decision of the Arbitral Tribunal. Shri Thakore has relied upon Para 17 of thereof which reads as under;

17.(cid:9)The question that will arise is whether this Court can exercise its extra ordinary jurisdiction under Article 226 of the Constitution or Article 227. Article 227 is the power of superintendence of this Court over Tribunals. For that purpose it will have to be examined whether the Arbitral Tribunal as constituted under the Act of 1996 is a Tribunal over which this Court would have supervisory jurisdiction. the other aspect of the matter would be to consider whether the Arbitral Tribunal would come under the expression of "other person" and as such a writ could be issued to such person or authority under Article 226. Before proceeding to examine the matter it would be advisable to consider some judgments of the Apex Court in so far as appointment of Arbitrators are concerned. At this outset let me make it clear that a distinction has been drawn between a statutory Tribunal and a Tribunal appointed by consent of parties.

It is in that context the need to examine the decisions rendered under Section 10-A of the Industrial Disputes Act, 1947. The first such judgment before Section 10(A) was amended is in the case of Engineering Mazdoor Sabha v. Hind Cycles Ltd. AIR 1963 SC 874. The question before the Apex Court was whether against an award by an Arbitrator appointed under Section 10-A of the I.D. Act, an appeal could lie to the Apex Court under Article 136. An appeal lies only from order of Courts or Tribunals. The question was whether the Arbitrator appointed under Section 10(A) was a Tribunal. Gajendragadkar, J., as the learned Chief Justice then was, observed as under (At Pp. 881-882 of AIR):- (cid:9)"Article 226 under which a writ of certiorari can be issued in an appropriate case is, in a sense, wider than Article 136, because the power conferred on the High Courts to issue certain writs is not conditioned or limited by the requirement that the said writs can be issued only against the orders of Courts or Tribunals.

Under Article 226 (1), an appropriate writ can be issued to any person or authority, including in appropriate cases any Government, within the territories prescribed. Therefore, even if the arbitrator appointed under Section 10-A is not a Tribunal under Article 136 in a proper case, a writ may lie against his award under Art. 226". (cid:9)The next judgment is in the case of Rohtas Industries Ltd. v. Rohtas Industries Staff Union, AIR 1976 SC 425. A reference was made under Section 10-A of the Industrial Disputes Act, 1947. An award came to be passed. The said Award when challenged before the High Court of Calcutta was rejected in so far as denial of wages during the strike period. However, the Court quashed part of the award which directed payment of compensation by the workers to the management. The company came in appeal against the said judgment. Before the Apex Court various challenges were raised.

We are concerned with the first challenge which was formulated as under:- (cid:9)"An award under Section 10-A of the Act Saviours of a private arbitration and is not amenable to correction under Art. 226 of the Constitution. " (cid:9)To the same argument there was an additional argument which ran as under:- (cid:9)"Even if there be jurisdiction, a discretionary desistence from its exercise is wise, proper and in consonance with the canons of restraint this Court has set down" (cid:9)While answering the said issue the Apex Court has observed as under [AIR 1976 SC 425, Para 9]:- (cid:9)"The expansive and extraordinary power of the High Courts under Article 226 is as wide as the amplitude of the language used indicates and so can affect any person --even a private individual--and be available for any (other) purpose, even one for which another remedy may exist. The amendment to Article 226 in 1963 inserting Article 226(1-A) reiterates the targets of the writ power as inclusive of any person by the expressive reference to "the residence of such person".

(cid:9)The Court examined the judgment in Engineering Mazdoor Sabha (AIR 1963 SC 874) and thereafter proceeded to answer as under (At P. 429 of AIR 1976 SC):- (cid:9)"We agree that the position of an arbitrator under Section 10-A of the Act (as it then stood) vis a vis Article 227 might have been different. Today, however, such an arbitrator has power to bind even those who are not parties to the reference or agreement and the whole exercise under Section 10-A as well as the course of the force of the award on publication derives from the statute. It is legitimate to regard such an arbitrator now as part of the methodology of the sovereign's dispensation of justice, thus falling within the rainbow of statutory Tribunals amenable to judicial review. This observation made en passant by us is induced by the discussion at the bar and turns on the amendments to Section 10-A and cognate provisions like Section 23, by Act XXXVI of 1964".

(cid:9)Relying on these judgments it was sought to be argued that the arbitral Tribunal under the Act of 1996 would be such other person to whom a writ could go under Article 226 of the Constitution. Before proceeding to consider that aspect of the matter, it is essential to refer to the subsequent judgment of the Apex Court in the case of Raipur Development Authority v. M/s. Chokhamal Contractors, AIR 1990 SC 1426. The judgment of Rohtas Industries (AIR 1976 SC 425) came up for consideration before the Apex Court in the case of Raipur Development Authority (supra). It was sought to be contended that under the Act of 1940 the Arbitrators were bound to give reasons as that was a requirement of natural justice and in the event reasons were not given the Award was liable to be remitted or set aside. In other words the Apex Court was called upon to consider the question whether an arbitrator appointed under the Act of 1940 was exercising quasi judicial powers and as such on failure to give reasons the award was liable to be set aside.

Reliance was also placed in the case of Rohtas Industries. (AIR 1976 SC 425). the same was distinguished by the Apex Court by observing as under (Para 32 of AIR 1990 SC 1426):- (cid:9)"A distinction was thus made between statutory arbitrations under Section 10-A of the Industrial Disputes Act and private arbitrations. It is not necessary to refer to the other cases cited before us which have a bearing on Section 10-A of Industrial Disputes Act, 1947". (cid:9)What is important to bear in mind are the following observations in para 37 of the judgment which are reproduced hereinbelow :- (cid:9)"There is however, one aspect of non-speaking awards in non-statutory arbitrations to which Government and Governmental authorities are parties that compel attention. The trappings of a body which discharges judicial functions and requires to act in accordance with law with their concomitant obligations for reasoned decisions are not attracted to a private adjudication of the nature of arbitration as the latter, as we have noticed earlier, is not supposed to expert the State's sovereign judicial power".

(cid:9)It is thus clear from the said judgment that the Apex Court came to the conclusion that trappings of a body which discharges judicial functions and requires to act in accordance with law with their concomitant obligation for reasoned decisions are not attracted to a private adjudication of the nature of arbitration as the latter is not supposed to exept the State's sovereign judicial power. Before proceeding further it will also be necessary to refer to the judgment relied upon by the respondents in the case of Smt. Rukmanibai Gupta v. Collector,