Orissa High Court
State Of Orissa And Anr. vs Gokul Chandra Kanungo on 20 December, 1985
Equivalent citations: 1986(I)OLR263
JUDGMENT S.C. Mohapatra, J.
1. Order dated 2-9-1985 passed by the learned Subordinate Judge, Bhubaneswar, is assailed in this Civil Revision. The order reads as follows :
"Counsel for both parties file haziras Direct the respondent to appoint a Special Tribunal by 4-10-1985 to arbitrate upon the dispute."
"Both parties do not dispute that the order is purported to be one under Section 41A of the Arbitration Act, 1940 (hereinafter referred to as the Act".
2. Opposite party was entrusted with the construction work of the High Level Bridge over the River Rushikulya on National Highway No. 5 near Ganjam. The parties entered into an agreement to that effect on 25-5-1970. Since 1972 disputes of one nature or the other arose between the parties which were resolved by an Arbitrator appointed by the Court. Those are not subject matters of this revision. On 27-11-1981 a notice was issued by the opposite party demanding the amount due with interest at 19.5% per annum which was disputed by petitioner No. 2 in his reply dated 9. 12 1981. In view of the aforesaid reply, an application under Section 20 of the Act was filed by the opposite party in the Court annexing to the petition, the letter containing his claim before petitioner No. 2. This was registered as O. S. No. 318 of 1981-1. By order dated 7-5-1982, an Arbitrator was appointed by the Court Opposite party challenged the order of issuing reference with regard to some points of reference to the Arbitrator in this Court in Civil Revision No. 514 of 1982. This Court dismissed the Civil Revision by the decision dated 9.9.1982.
3. When the Arbitrator was proceeding with the reference, the petitioners moved the trial Court for removal of the Arbitrator. The prayer having been refused by order dated 18.12.1982, they moved this Court in Civil Revision No. 125 of 1983 assailing the order. The proceeding before the Arbitrator was stayed pending disposal of the Civil Revision. At that stage, the Act was amended by the Orissa Act 3 of 1983 incorporating Section 41-A which came into operation on 26.3.1983. Accordingly, the Arbitrator by his order No. 15 dated 8.4.1983 directed the parties to move the trial Court for transfer of the proceeding before him to the Arbitration Tribunal. Shortly thereafter, the Arbitrator returned back the reference made to him by the Court along with the documents for referring the matter to the Arbitration Tribunal.
4. Before the records were transmitted by the trial Court to the Arbitration Tribunal, an application under Section 5 of the Act was filed by the opposite party on 30.9.1983 for revoking the authority as one of the three members constituting the Tribunal was alleged to be hostile to the opposite party and for directing the Arbitrator appointed by the Court for proceeding who the reference which was registered as M. J. C. No. 328 of 1983. During pendency of the application, petitioners did not press the Civil Revision No. 125 of 1983 which was accordingly dismissed. The trial Court by order dated 3.11.1983 dismissed M. J. C. No. 328 of 1983 on the finding that the application for revoking the authority of the Arbitration Tribunal was premature. Opp. party assailed the order in C. R. No. 797 of 1983 and C. R. No. 798 of 1983. During pendency of these two Civil Revisions, by order dated 20.12.1983, the trial Court transferred the reference to the Arbitration Tribunal in view of Section 41-A (7) of the Act.
5. While the aforesaid two Civil Revisions were pending, Section 41-A was amended retrospectively from 26.3.1983 by the Orissa Act 17 of 1984 which came into operation on 21.7.1984 being published in the official Gazette that day. In this background, the Civil Revision Nos. 797 and 798 of 1983 were heard on 7.9.1984 when both the parties submitted that the validity of the Orissa Act 3 of 1983 was under challenge in the Supreme Court and the operation of the amending Act had been stayed. In that view, since the Arbitration Tribunal could not have proceeded with the reference, the merit of the impugned order was not gone into. The basis of the grievance of the opp. party regarding bias of one of the three members of the Arbitration Tribunal and its effect not having been considered by the trial Court, the order was not setaside and the matter was remitted back for reconsideration by the trial Court after disposal of the stay matter by the Supreme Court.
6. After receipt of the order, the trial Court by its order dated 15.10.1984 directed Misc. Case No. 328 of 1983 to be put up after disposal of the stay matter in the Supreme Court. On 5.2.1985, counsel for both parties filed a joint memorandum stating that no stay matter was pending in the Supreme Court in respect of the arbitration proceeding involved in this case. The trial Court directed the stay matter to be put up in presence of the counsel for both parties. The case was being adjourned from day to day for the said purpose lastly on 2.9.1985 when the trial Court passed the impugned order. The claimant-opposite party having got rid of the proceeding before the Arbitration Tribunal has not challenged the order.
7. Mr. R. K. Patra, the learned Additional Government Advocate No. 1, submitted that the Court has no jurisdiction to direct appointment of a Special Arbitration Tribunal which is within the discretion of the State Government.
8. Power of Court to appoint an Arbitrator is provided under Section 8 of the Act. In the contingency provided under Section 20(3) of the Act, Court can appoint an Arbitrator. It can also substitute an Arbitrator appointed under Section 12 of the Act. Section 41-A as Inserted by the State Legislature is a special provision in respect of a specified category of disputes. The provision has been held to be mandatory in the decision reported in 1985 (I) O. L. R. 32 (The State of Orissa v. Rama Chandra Sahu and Anr.) While following the principle laid down in this decision it has been held in the decision reported in 1985 (II) O. L R. 584 (State of Orissa Irrigation and Power Department, Bhubaneswar and others v. Shri Bhaskar Biswal and another) that there is no scope for a Court in Orissa to appoint an Arbitrator other than an Arbitration Tribunal. In both decisions the appointment of an Arbitrator by the trial Court was challenged and during pendency of the revision, Section 41-A came into operation. The present case is one where the reference had already stood transferred to the Arbitration Tribunal under Section 41-A(7) of the Act when an application was filed under Section 5 of the Act for revoking the authority of the Arbitration Tribunal on the ground that one of the three members was biased against the opposite party.
9. After the order dated 3.11.1983 was set aside with the direction to consider the matter afresh, the trial Court had no jurisdiction to direct the petitioners to appoint a Special Tribunal within a date fixed in the order. On this short ground, the order is liable to be set aside.
10. The trail Court court not have directed the petitioners for appointing a Special Tribunal and that too within a time fixed by it, in the circumstances of this case. Entering into a contract for a work is the executive function of the State. Unlimited power is not given to the Executive Engineer. The parties did not agree to a particular person or office held by a person to be the Arbitrator. Parties agreed that the Chief Engineer is to appoint an Arbitrator, whose qualification has also been indicated in the agreement. There fore, Executive Engineer (petitioner No. 2) had no scope to comply with the direction of the Court.
It is to be examined if petitioner No. 1, the State Government in the Works Department could appoint the Special Tribunal as directed. In order that the State Government is able to transfer a proceeding pending before an Arbitrator, the following conditions are to be satisfied :
a ) The claim or dispute involves rupees one crore or above; and b ) A Special Arbitration Tribunal has been constituted under provision to Sub-Section (i) of Section 41-A. Even if the above two conditions are satisfied, the State Government is not compelled to transfer the reference to the Special Arbitration Tribunal. While exercising the power under Sub-Section (7), there is no scope to constitute a Special Arbitration Tribunal. The plain language of Section 41-A also does not authorise a Court exercising powers under the Act to direct the State Government to constitute a Special Arbitration Tribunal.
Besides, the executive function of the State Government is to be governed by rules made under Article 166 of the Constitution. In the rules made by the Government called the Rules of business, different departments have been allocated different functions. State Government in Works Department (petitioner No. 1) has not been allocated the function of constituting Special Arbitration Tribunal under Section 41-A(1) provision of the Act.
Reading Section 41-A it will be seen that the words 'State Government have been used in Sub-Section (1), (2), (4), (6) and (7), In Sub-Section (6), the existing Arbitration Tribunal constituted under the Arbitration Tribunal Rules, 1979, which are a set of executive instructions, is recognised to be the statutory Arbitration Tribunal until one is constituted under Sub-Section (1). Therefore, the meaning of 'State Government' in the various sub-sections will be the same as is in the Sub-Section (6). In Sub-Section (6), the State Government in the Irrigation and Power Department constituted the Arbitration Tribunal under the 1979 Rules which were also made by the same Department. Therefore, the legislative intention becomes clear that the State Government in the Irrigation and Power Department would be exercising the powers under Section 41-A until the Governor allocates the business to any other Department or Departments.
In such a situation, the direction to the State Government in Works Department (petitioner No. 1) cannot be implemented by it. No Court should pass an order which cannot be implemented.
11. In case the authority of an Arbitrator is revoked, the Court gets jurisdiction under Section 12(2) of the Act to appoint an Arbitrator. This provision does not authorise the Court to direct a party to appoint an Arbitrator. Since, the authority of the Arbitration Tribunal has not yet been removed, the question becomes academic at this stage.
12. In the result, the impugned order dated 2-9-1985 is set aside the Civil Revision is allowed and the matter is remitted back to trial Court. The trial Court is directed to consider the application under Section 5 of the Act registered as M. J. C. No. 328 of 1983 afresh giving, adequate opportunity to the parties for hearing the application. The matter being long. pending, the trial Court shall do well to dispose of the same by end of March, 1986. Parties shall appear before the trial Court on 6.1.1986 (Monday) for fixing the date of hearing. There shall be no order for costs in this Civil Revision.