Andhra HC (Pre-Telangana)
Padmavathi Constructions vs Andhra Pradesh Industrial ... on 3 August, 1999
Equivalent citations: 1999(5)ALD609
ORDER
1. This writ petition is filed under Article 226 of the Constitution of India praying for issue of a writ, order or direction, particularly one in the nature of writ of prohibition restraining the Respondent No.5-H Additional Chief Judge, City Civil Court from proceeding with the OP No.161 of 1998 filed by the respondent Nos.1 to 4 for the reasons stated in the affidavit accompanying the petition.
2. The writ petitioner is a partnership firm, which entered into a contract with the 1st respondent-Corporation. When the Zonal Manager, Tirupathi of the 1st respondent invoked the bank guarantees issued by the State Bank of Hyderabad, the petitioner herein filed WP No. 1161 of 1996 questioning the said action. Though the said writ petition was dismissed by the learned single Judge, an appeal was filed in WA No.836 of 1996. In the course of hearing, the parties have agreed for referring the dispute to the arbitration. Hence ( Sri Justice K. Punnaiah was appointed as Arbitral Tribunal for resolving the dispute between the parties. The said order was passed on 26th July, 1996. This Court also observed that the proceedings before the arbitrator are on conditions as incorporated in the Arbitration Act and Arbitration Conciliation Ordinance, 1996. It was also further observed that the parties shall be at liberty to move the Chief Justice of this Court for any further direction. In pursuance of the said order, Arbitral Tribunal of Sri Justice K. Punnaiah has entered into the reference on 4-9-1996 and gave his award on 27-10-1997. Thereafter the respondents 1 to 4 filed OP No.161 of 1998 on 23-1-1998 before the 5th respondent and the same was filed under Sections 30 and 33 of the Arbitration Act, 1940 (hereinafter called 'the Act') to set aside the Award dated 27-10-1997 passed by the Arbitral Tribunal of Sri Justice K. Punnaiah. According to the petitioner the appointment of the Arbitrator must be with reference to the powers conferred upon the High Court in the light of the provisions contained in Section 11 of the Arbitration and Conciliation Act, 1996 (Act 26 of 1996) read with the Scheme for appointment of Arbitrators 1996, It was also stated that by virtue of the provisions contained in the Arbitration and Conciliation Act, 1996 the Act shall be deemed to have come into force on 25thJanuaiy, 19%. Therefore, the appointment of the Arbitrator is governed by the provisions of this Act and not by the Arbitration Act, 1940. It was also the contention of the learned Counsel for the petitioner that as per Section 8 of the Act 26 of 1996, when an action is brought before a judicial authority, it is that judicial authority which shall have the power to refer to parties to the Arbitration. Further the appointment of an Arbitrator can be questioned only with reference to the provisions of Section 13. Further when an award is made by an Arbitrator, the aggrieved party can question the same under Section 34 and there is no other forum under which the said Award can be questioned. As the present Award was not questioned under Section 34 it has become final and became an enforceable decree. The learned Counsel also contended that by virtue of the provisions of Section 85 of the Ordinance as well as the Act replacing the said Ordinance, the provisions of the Act are repealed and therefore the provisions of the said Act have no application. The learned Counsel also contended that Section 42 of the Act 26 of 1996 provides jurisdiction for redressal against the Awards and according to the said provision where an application under the arbitration agreement has been made in a Court, that Court alone shall have jurisdiction over the arbitral proceedings and all subsequent applications arising out of that agreement and arbitral proceedings shall be made in that Court and in no other Court. It was therefore contended that as an Arbitrator was appointed by this Court consisting of the Bench of Hon'ble Chief Justice and another Judge only that Court has got the jurisdiction and the aggrieved party against the Award has to approach that Court only for redressal. The learned Counsel also stated that though an application was filed by way of IA No.531 of 1998 objecting to the jurisdiction of the 5th Respondent, instead of deciding the issue of jurisdiction, the 5th respondent has directed the IA. to be posted along with the main Original Petition (O.P) and thus inclined to proceed and decide the OP No.161 of 1998, even though the said 5th respondent has no jurisdiction to proceed under the provisions of the act. As the petitioner has no other effective remedy, it has filed the present writ petition and sought for the writ of prohibition.
3. The learned Counsel for the respondents opposed the contentions of the petitioner. A counter is filed disputing the claims of the petitioner. In the counter though the respondents have not disputed the proceedings before this Court in writ appeal where it was agreed for the appointment of an Arbitrator and also the reference to the Arbitral Tribunal, however, it is stated that the said appointment was under the provisions of the Act, 1940 and not under the provisions of the Act 26 of 1996. The learned Counsel also contended that the Act 26 of 1996 has come into force only from 22-8-1996. Therefore the said Act has no application as the Arbitrator was appointed much before the said Act came into force. Therefore, it is only the Old Act i.e., the Arbitration Act, 1940 which is applicable. When once the Arbitrator was appointed under the Arbitration Act, 1940, the provisions of that Act alone are applicable for any subsequent disputes. Therefore the respondents have rightly filed the OP under Sections 30 and 33 of the Act. The learned Counsel also contended that even assuming that the said Court has no jurisdiction, it is always open to the writ petitioner to raise all these objections before the said Court, which has got ample powers to decide whether that Court has jurisdiction to proceed with OP filed under the provisions of the Act. The learned Counsel also referred to the Scheme of the New Act and also to various provisions relevant for the appointment of the Arbitrator and also about the Court that has got jurisdiction where the Award passed by such Arbitrator can be disputed by the aggrieved parties. The learned Counsel also contended that the Court referred to in Section 42 should be confined only to the Court as defined in Section 2(e). The said definition does not comprehend the jurisdiction of this Court either for the purpose of appointment of Arbitrators or to seek redressal against the Arbitration Award. It is, therefore, contended that this is not a fit case for issue of a writ of prohibition.
4. In reply, the learned Counsel for the petitioner contended that he is confining his arguments only to the jurisdiction of the 5th Court to proceed with the OP which was filed under Sections 30 and 33 of the Arbitration Act, 1940. According to him the said Court does not have the jurisdiction as the appointment of the Arbitrator as well as rendering of the Award was effected after the provisions of the Act were repealed. Therefore the Arbitration Act, 1940 itself was not in existence and as such the provisions of the said Act are not applicable to the present proceedings. It is also stated that by virtue of the saving provision contained in the Ordinance as well as in the Act 26 of 1996, only the Arbitration proceedings that were entered into prior to its repeal are saved and can be proceed under the repealed Act.
5. Having regard to the rival contentions the dispute that arises for consideration is whether the Arbitral Proceedings referred to here are governed by the provisions of the Arbitration Act, 1940 or by the provisions of the Arbitration and Conciliation Act, 1996.
6. There is no dispute with reference to the initiation and commencement of the arbitral proceedings. The petitioner-contractor has agreed to invoke the arbitration clause and the respondent corporation has favourably responded to the proposed arbitration. Further the consent of justice Sri K. Punnaiah was conveyed to act as Arbitral Tribunal. Hence the Division Bench of this Court consisting of Hon'ble Chief Justice and another Judge have passed the orders, The order of this Court also shows that the Arbitrator has expressed his willingness to take up the arbitration on condition of his appointment by the Court and the control of the Court upon the proceedings before him on conditions as incorporated in the Arbitration Act and Arbitration and Conciliation Ordinance, 1996 (hereinafter referred to as 'the Ordinance'). The said order also incorporated another clause that the parties shall be at liberty to move the Hon'ble the Chief Justice of this Court for any further direction. From the above it is clear that reference was made under both the provisions of the Act and the Ordainance. As there was reference to both the Act and the Ordinance, the contention of the petitioner is that the provisions of the Act were repealed by the Ordinance. Therefore, the said Act was not in force as on that day and only the provisions of the Ordinance that holds the field. Further as the said Ordinance was repealed the Act 26 of 1996 the provisions of the said Act are applicable to the present proceedings. The contention of the respondents on the other hand is that the proceedings are governed by the provisions of the Act and the reference to the Ordinance is only a passing reference. Admittedly, the order of the Division Bench of this Court passed on 26th July, 1996. In fact, one of the contentions of the respondents was that the Act came into force as per the Notification issued by the Central Government in terms of Section 1(3), only from 22-8-1996. Therefore, it is contended that the provisions of the said Act have no application.
7. In order to resolve the issue the provisions of the Ordinance can be looked into. The said Ordinance was promulgamated by the President of India in exercise of the powers conferred by clause (1) of the Article 123 of the Constitution of India. As per the Notification issued by the Central Government it came into effect from 25-1-1996. It extends to the whole of India. Section 85 deals with repeal and savings and it would be convenient to extract the said section, which is as follows:
"85. Repeal and saving :--(1) The Arbitration (Protocol and Convention) Act, 1937 (6 of 1937), the Arbitration Act, 1940 (10 of 1940) and the Foreign Awards (Recognition and Enforcement) Act, 1961 (45 of 1961) are hereby repealed.
(2) Notwithstanding such repeal,--
(a) the provisions of the said enactments shall apply in relation to arbitral proceedings which commenced before this Ordinance came into force unless otherwise agreed by the parties, but this Ordinance shall apply in relation to arbitral proceedings which commenced on or after this Ordinance comes into force;
(b) all rules made and notifications published, under the said enactments shall, to the extent to which they are not repugnant to this Ordinance, be deemed respectively to have been made or issued under this Ordinance."
8. The above section shows that the provisions of the Arbitration Act, 1940 are repealed. However, by virtue of subsection (2) certain of the proceedings are saved. Notwithstanding such repeal, the provisions of the said repealed Act shall apply in relation to the arbitral proceedings which commenced before this Ordinance came into force, unless otherwise agreed by the parties. But this Ordinance shall apply in relation to the arbitral proceedings which commenced on or after this ordinance came into force. As a result of the above provision the Arbitration proceedings which commenced on or after the promulgamation of the Ordinance, are covered by the provisions of the Ordinance only. The provisions of the Act are repealed and they will apply only to the proceedings which have already commenced before this Ordinance came into force, It is not in dispute that by the date of the commencement of the present arbitral proceedings the Ordinance was promulgamated. Therefore, only the provisions of the Ordinance alone are applicable. No doubt there is a reference in the order of this Court both to the Act and the Ordinance. It is nobody's case that the proceedings are governed by the provisions of both the Act and the Ordinance. Apart from that the order also stipulates that the parties are at liberty to move the Hon'ble the Chief Justice of this Court for any further directions. From this one can infer that the said direction must have been incorporated in the light of the provisions contained in the arbitration Ordinance only. If it was the intention of this Court that the parties are governed by the provisions of the Act a direction would have been incorporated to approach the Civil Court or even otherwise to approach the Division Bench and not the Hon'ble the Chief Justice of this Court. In fact, the provisions of Section 11 of the Ordinance provides for the appointment of the Arbitrators. If there is any dispute as to the appointment of an Arbitrator or Arbitrators the appointment shall be made upon the request of a party by the Hon'ble the Chief Justice or any person or institution designated by him. Therefore, it could be inferred that the appointment of the Arbitral Tribunal was in the light of the provisions of the Ordinance. The said inference is also further strengthened by the reference of the Arbitrator of the provisions of the Act 26 of 1996 while passing the Award. No doubt there was a reference by the Division Bench of this Court to the Arbitration Act also. By that it could not be inferred that the proceedings are governed by the Act which was repealed. When the Act itself is not in force, it is futile to contend that the proceedings are governed by that Act. As the arbitral proceedings were commenced after the Ordinance came into force, only the provisions of the said Ordinance alone apply. This position is very clear from Section 85 of the Ordinance and there is no ambiguity in that position. Further, though the Act 26 of 1996 came into force on 22-8-1996 as notified by the Central Government in the Official Gazettee, by virtue of the provisions of Section 86 any action taken in pursuance of the provisions of the Ordinance, it shall be deemed to have been made under the corresponding provisions of this Act. The said Section 86 deals with the repeal of the Ordinance. By virtue of the said section the provision of the Act 26 of 1996 applies to all the actions taken under the Ordinance from 25-1-1996. Therefore, there is no merit in the contention of the respondents that the Act 26 of 1996 came into force only on 22-8-1996 and hence it is not applicable to the present proceedings.
9. The learned Counsel for the respondents, however, relied upon certain decisions. The first one is in the case of Secretary, Government of Orissa v. Sarbeswar Rout, . The issue in the said case was only regarding the point when arbitration proceedings could be said to have commenced. According to the said decision the arbitration proceedings could be said to have commenced on the date of the direction by the Arbitrator to the parties to file their statements of claim. In the present case there is no dispute when the arbitration proceedings have commenced. Therefore, the said decision is not of any relevance. He also relied upon the decision in Union of India v. Upendra Singh, . This decision was relied upon by the learned Counsel in support of his contention that a writ of prohibition could not be issued in the circumstances of the present case. In that case the Central Administrative Tribunal examined the correctness of the charges against the respondent on the basis of the material produced by him and quashed the same. On appeal, allowing the appeal it was held by the Hon'ble Supreme Court as follows :
"In the case of charges framed in a disciplinary inquiry the Tribunal or Court can interfere only if on the charges framed (read with imputation or particulars of the charges, if any) no misconduct or other irregularity alleged can be said to have been made out or the charges framed are contrary to any law. At this stage, the Tribunal has no jurisdiction to go into the correctness or truth of the charges. The Tribunal cannot take over the functions of the disciplinary authority. The truth or otherwise of the charges is a matter for the disciplinary authority to go into. Indeed, even after the conclusion of the disciplinary proceedings, if the matter comes to Court or Tribunal, they have no jurisdiction to look into the truth of the charges or into the correctness of the findings recorded by the disciplinary authority or the appellate authority as the case may be. The function of the Court/Tribunal is one of judicial review."
The next decision is in the case of Y. Parthasarathy v. G.M., Railway Electrification, 1997 (3) ALD 322. In that case the issue was when the arbitral proceedings have commenced. The learned Judge of this Court held that arbitral proceedings in respect of a particular dispute commence on the date on which a request for that dispute to be referred to arbitration is received by the respondent. Though a suit was filed under the provisions of the Act, but, as the same was withdrawn before the written statement was filed by the otherside, it was held that the arbitration proceedings had not commenced and hence the application filed under Section 11(5) of the New Act was valid.
The next decision is in the case of Baby Paul v. Hindustan Paper Corporation, . Here also the issue was the commencement of the arbitral proceedings.
10. In the present case there is no dispute regarding the commencement of the arbitral proceedings. Therefore, the above decisions dealing with the issue of commencement of the arbitral proceedings are not relevant. Insofar as the decision of the Supreme Court in the case of Union of India v. Upendra Singh (supra) it was held that a writ of prohibition can be issued only when there is a patent lack of jurisdiction and not otherwise and at that stage the Court cannot go into the merits of the matter. This decision is also not of any assistance to the respondents, it is the case of the petitioner that no proceedings under the provisions of the Act, 1940 would lie as the said Act was repealed by the time the arbitrary proceedings have commenced and hence the 5th respondent has no jurisdiction to proceed with the OP and the petitioner did not advance any arguments as to the merits of the matter.
11. From the above it is clear that the arbitral proceedings commenced by virtue of the orders of this Court in WA No.836 of 1996 on 26-7-1996 when the Ordinance was holding the field and the Act was repealed by the said Ordinance. Therefore, the application of the provisions of the Act does not arise. Even according to Section 85 of the Ordinance as well as the Act 26 of 1996 which is identical, only the proceedings which are commenced before the said Ordinance/Act 26 of 1996 came into force are governed by the provisions of the Act, 1940, unless otherwise agreed by the parties. As per the said Section, the provisions of the Ordinance/Act 26 of 1996, shall apply in relation to the arbitral proceedings which commenced on or after the Ordinance/New Act comes into force. Admittedly, the present arbitral proceedings have commenced only after the Ordinance came into force. Hence, the provisions of the Ordinance shall apply. However, by virtue of the provisions of Section 86 of the New Act the provisions of the New Act (26 of 1996) would apply to all the proceedings that were commenced under the provisions of the Ordinance. This position is also clear from the Award where it was specifically referred by the Arbitrator that the Award was passed keeping in view the provisions of the Arbitration and Conciliation Act, 1996 (New Act). Therefore, it is clear that the provisions of the Act (old Act) have no application and the proceedings under the said Act are without jurisdiction. Though the petitioner has raised these objections before the 5th respondent by filing an Interlocutory Application, instead of deciding the said petition, the 6th respondent has directed the said LA. to be posted along with the main O.P. thereby indicating that the 5th respondent would like to proceed with the main OP. Under the above circumstances, the petitioner has no other remedy except to approach this Court. As already held the 5th respondent has no jurisdiction under the provisions of the Act. Hence, the writ of prohibition is issued, prohibiting the 5th respondent from proceeding with the OP No.161 of 1998, which was filed under the provisions of the Act, 1940.
12. At the time of hearing the learned Counsel for the respondents stated that the interest of the respondents may be safeguarded if the Court comes to the conclusion that the proceedings are without jurisdiction. This Court need not give any specific direction with reference to the said prayer. However, it is always open to the respondents to take appropriate proceedings that are available under law.
13. In the result, the writ petition is allowed. No costs.