R.R. Bansal Contractors v. Power Grid Corporation of India Ltd & Ors.

CORAM:- HON'BLE MR.JUSTICE PERMOD KOHLI. Present:- Mr. S.K. Singla, Advocate for the petitioner. Mr. Mansur Ali & Mr. H.S. Deol, Advocates for respondents. *** PERMOD KOHLI.J (ORAL) In view of the common questions of law and similar factual background, these petitions are being disposed of by this common order. The petitioners in these revision petitions entered into work contracts with respondent no.1-corporation in the year 1996 on the dates specified in the revision petitions. The parties executed agreements laying down terms and conditions relating to the execution of the contracts. There is a common clause 69 in all the agreements relating to settlement of disputes through arbitration. The same is being reproduced hereunder:- C.R. No. 4919 of 2003 -2- “ 69.0 Arbitration and laws: Arbitration.

69.1. Except where otherwise provided for in the contract all questions in disputes relating to the meaning of the specifications, designs, drawings and instructions herein before mentioned and as to the quality of workmanship or materials used on the work or as to any other question, claim, right matter or thing whatsoever is any way arising out of or relating to the contract, designs, drawings, specifications, estimates, instructions, orders or these conditions or otherwise concerning the works or the execution of failure to execute the same whether arising during the progress of the work, or after the completion or abandonment there of shall be referred to the sole arbitration of the General Manager of Power Grid Corporation of India Ltd. And if the General Manager is unable or unwilling to act, to the sole arbitration of some other person appointed by the Chairman & Managing Director, Power Grid, willing to act as such arbitrator. There will be no objection if the arbitrator so appointed is an employee of Power Grid Corporation of India Ltd. And that he had to deal with the matters to which the contract relates and that in course of his duties as such he had expressed views on all or any of the matters in dispute or difference. The arbitrator to whom the matter is originally referred being transferred or vacating his office or being unable to act for any reason as aforesaid at the time of such transfer, vacation of office or inability to act, Chairman and Managing Director, Power Grid Corporation of India Ltd. Shall appoint another person to act as arbitrator in accordance with the term of the contract. It is also a term of this contract that no person other than a person appointed by CMD, Power C.R. No. 4919 of 2003 -3- Grid, as foresaid should act as arbitrator and if for any reason, that is not possible, the matter is not to be referred to arbitration at all. The above shall except otherwise stipulate apply to contracts whose value does not exceed Rs. fifty lakhs. For contract value exceeding Rs. fifty lakhs in the event of any differences/disputes which cannot be resolved amicably. The aggrieved party as Claimant shall serve a notice of his/their disagreement/dispute having arisen on the opposite party (respondent) calling upon the later to nominate his/their nominee as arbitrator within one month of the dat of such notice and that in the event of failure in nominating arbitrator by the respondent within 30 days of the notice by the claimant, the arbitrator nominated by the Claimant shall become the sole arbitrator. Where, however, if both the party nominates one arbitrator each i.e. Contractor nominates one person to act as arbitrator and Power Grid nominates one arbitrator. As required under Indian Arbitraton Act, 1940 both the arbitrators shall appoint umpire, before entering into the reference of disagreement/disputes before the two arbitrators enter into the reference. Subject as aforesaid the provision of the Arbitration Act, 1940 or any statutory modification or re-enactment thereof and the rules made there under and for the time being in force shall apply to the arbitration proceeding under this clause. It is a term of the contract that the party invoking arbitration shall specify the dispute or disputes to be referred to arbitration under this clause together with the amount or amounts claimed in respect of each such dispute. C.R. No. 4919 of 2003 -4- The arbitrator (s) may from time to time with consent of the parties enlarge the time, for making and publishing the award. The work under the contract shall, if reasonably possible, continue during the arbitration proceedings and no payment due or payable to the contractor shall be withheld on account of such proceedings. The Arbitrator/Arbitrators shall be deemed to have entered on the reference on the date he/they issue notice to both the parties fixing the date of hearing and holding the arbitration proceedings referred to him/them. The venue of arbitration shall be such place as may be fixed by the Arbitrators in his/their sole discretion. The award of the Arbitrators/umpire as the case may be shall be final, conclusive and binding on all parties of his contract. The cost of arbitration shall be borne by the parties to the dispute, as may be decided by the arbitrator (s). In the event of dispute or difference arising between one public sector enterprise and a Govt. Department or between two public sector enterprises the above stipulation shall not apply the provisions of BPE office memorandum No. BPE/GL-001/76/MAN/2(110-75-BPE gmi-1) dated 1st January, 1976 or its amendments for arbitration shall be applicable.” Certain disputes arose between the parties regarding the execution of the contracts. The petitioners/contractors filed three applications in the court of Civil Judge (Sr. Divn.), Faridkot for reference of disputes to the Arbitrator. Though, the applications were styled as Petition under section 8 of the Arbitration Act, 1996, however, in fact these C.R. No. 4919 of 2003 -5- applications were under Section 11 (6) of the Arbitration and Conciliation Act, 1996. On being put to notice the respondent-corporation filed the reply pleading waiver of arbitration clause on behalf of the contractor and concurrence on its behalf in this regard. The Civil Judge (Sr. Divn.) vide the impugned orders dismissed the petitions declining to refer the parties to the Arbitrator. These revision petitions are directed against the orders passed by the learned Civil Judge (Sr. Divn.), Faridkot. From the impugned orders, it is evident that these applications under section 8 of the Arbitration and Conciliation Act, 1996 were not filed in any pending suit between the parties. To the contrary these applications were filed seeking reference of the disputes to the Arbitrator. As a matter of fact these applications were filed under Section 11 (6) of the Arbitration and Conciliation Act, 1996 wrongly styled under section 8 of the Act. Apart from the question whether the civil court was competent to decide the question of waiver of the arbitration clause, the impugned orders are liable to be set aside in view of the law laid down by the Hon'ble Supreme Court in case of S.B.P & Co.Vs. M/s Patel Engineering Ltd. & another, reported as 2005 (4) RCR (Civil) 747. In the aforesaid judgement, it has been ruled by the Hon'ble Supreme Court that the authority vested with the Hon'ble Chief Justice under Section 11 of the Arbitration and Conciliation Act, 1996 cannot be delegated to subordinate courts even by framing a scheme envisaged under this section. The relevant observations of the Hon'ble Supreme Court are reproduced hereunder:- C.R. No. 4919 of 2003 -6- “ 46. We, therefore, sum up our conclusions as follows: i) The power exercised by the Chief Justice of the High Court or the Chief Justice of India under Section 11(6) of the Act is not an administrative power. It is a judicial power. ii) The power under Section 11(6) of the Act, in its entirety could be delegated, by the Chief Justice of the High Court only to another judgment of that Court and by the Chief Justice of India to another Judge of the Supreme Court. Iii) In case of designation of a judge of the High Court or of the Supreme Court, the power that is exercised by the designated, judge would be that of the Chief Justice as conferred by the statute. iv)The Chief Justice or the designated judge will have the right to decide the preliminary aspects as indicated in the earlier part of this judgment. These will be, his own jurisdiction, to entertain the request, the existence of a valid arbitration agreement, the existence or otherwise of a live claim, the existence of the condition for exercise of his power and on the qualification of the arbitrator or arbitrators. The Chief Justice or the judge designated would be entitled to seek the opinion of an institution in the matter of nominating an arbitrator qualified in terms of Section 11(8) of the C.R. No. 4919 of 2003 -7- Act if the need arises but the order appointing the Arbitrator could only be that of the Chief Justice or the judge designate. (v) Designation of a district judge as the authority under Section 11(6) of the Act by the Chief Justice of the High Court is not warranted on the Scheme of the Act. (vi) Once the matter reaches the arbitral tribunal or the sole abitrator, the High Court would not interfere with orders passed by the arbitrator or the arbiral tribunal during the course of the arbitration proceedings and the parties could approach the court only in terms of Section 37 of the Act or in terms of Section 34 of the Act. (vii)Since an order passed by the Chief Justice of the High Court or by the designated judge of that court is a judicial order, an appeal will lie against that order only under Article 136 of the Constitution of India to the Supreme court. (viii)There can be no appeal against an order of the Chief Justice of India or a Judge of the Supreme Court designated by him while entertaining an application under Section 11(6) of the Act. (ix) In a case where an arbitral tribunal has been constituted by the parties without having recourse to Section 11(6) of the Act, the arbitral C.R. No. 4919 of 2003 -8- tribunal will have the jurisdiction to decide all matters as contemplated by Section 16 of the Act. (x) Since all were guided by the decision of this Court in Konkan Railway Corp. Ltd. & Anr. v. Rani Construction Pvt. Ltd. (2002) 2 SCC 388 (supra) and orders under Section 11 (6) of the Act have been made based on the position adopted in that decision, we clarify that appointments of arbitrators or arbiter tribunals thus far made, are to be treated as valid, all objections being left to be decided under Section 16 of the Act. As and from this date, the position as adopted in this judgment will govern even pending applications under Section 11(6) of the Act. (xi)Where District Judges had been designated by the Chief Justice of the High Court under Section 11(6) of the Act, the appointment orders thus far made by them will be treated as valid; but applications if any pending before them as on this date will stand transferred, to be dealt with by the Chief Justice of the concerned High Court or a Judge of that court designated by the Chief Justice. C.R. No. 4919 of 2003 -9- (xii)The decision in Konkan Railway Corpn. Ltd. & anr. v. Rani Construction Pvt. Ltd. (2002) 2 SCC 388 (supra) is overruled.” The Hon'ble Supreme Court has saved only such orders whereby subordinate courts appointed the Arbitral Tribunals and matters were referred to for arbitration. All other orders have been declared to be without jurisdiction. Orders impugned in these petitions fall in the later category. In view of the clear dictum of the aforesaid judgement, the impugned orders are liable to be set aside being without jurisdiction. These petitions are, accordingly, allowed. Orders impugned are hereby set aside. In view of the observations of the Hon'ble Supreme Court petitions before the subordinate court shall stand revived. The same are required to be transferred to Hon'ble the Chief Justice of this Court in terms of direction nos. (i) to (iv) reproduced herein above. Copy of this judgement be placed on each connected file.

23.8.2010. Whether to be Reported? Yes. (PERMOD KOHLI) JUDGE