Jharkhand High Court
Dinesh Prasad vs State Of Jharkhand & Ors on 19 April, 2010
Equivalent citations: AIR 2010 JHARKHAND 154, 2010 (3) AIR JHAR R 260, (2010) 3 JCR 572 (JHA), 2011 (1) ARBI LR 62, (2011) 1 ARBILR 62
Author: D.N. Patel
Bench: D.N.Patel
IN THE HIGH COURT OF JHARKHAND AT RANCHI
W.P. (C) No. 4678 of 2009
Dinesh Prasad ...... Petitioner
Versus
1. State of Jharkhand through the Deputy Commissioner, Ranchi
2. The Superintending Engineer P W D Building B C D, South Chotanagpur
Circle No.-1, Ranchi
3. The Executive Engineer, Public Works Department, Building, Ranchi
Division No.-1, Ranchi ...... Respondents
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CORAM: HON'BLE MR. JUSTICE D.N.PATEL
For the Petitioner : Mr. Sudarshan Shrivastava, Advocate
For the Respondents : Mr. L.K. Lal, S.C. (L & C) &
Mr. Arvind Kr. Mehta, J.C. to S.C. (L & C)
---------
th
05/ Dated: 19 April, 2010
1. Present petition has been preferred under Article 227 of the Constitution
of India against an order passed by learned Subordinate Judge-I, Ranchi dated 8th
September, 2009 in Miscellaneous Case No. 07 of 2008, whereby, an application
preferred by the present petitioner (original opposite party) has been partly
allowed on contest and the award dated 10th October, 2007 passed by the
arbitrator, appointed between the parties by this Court, has been set aside only in
respect of extra work done by the opposite party/claimant, who is the present
petitioner, beyond the terms of agreement and it has been held that the present
petitioner is not entitled to get the payment of such extra work of Rs. 1,50,000/-
and interest thereupon. Thus partly, an award is quashed and application
preferred by the State under Section 34 of the Arbitration and Conciliation Act,
1996 (hereinafter to be referred to as the "Act, 1996") was partly allowed.
2. Learned counsel appearing for the petitioner vehemently submitted that
the order passed by the trial court is dehors the jurisdiction of the trial court,
looking to the provisions of Section 34 to be read with Section 2 (e) of the
Arbitration and Conciliation Act, 1996. It is further submitted by learned
counsel for the petitioner that the arbitrator has been appointed by the order of
this Court under Section 11(6) of the Act, 1996 and, therefore, as per Section 42
of the Act, 1996 only this Court has power, jurisdiction and authority to entertain
application for setting aside the arbitral award under Section 34 of the Act, 1996
and not the principal Civil Court at Ranchi is having a jurisdiction. This aspect
of the matter has not been properly appreciated by the trial court and, hence, the
order passed by the trial court at Annexure-4 to the memo of petition, in
Miscellaneous Case No. 07 of 2008, deserves to be quashed and set aside.
Learned counsel for the petitioner has relied upon a decision rendered by the
Hon'ble Supreme Court as reported in (2005) 10 SCC 353 and a decision
rendered by this Court as reported in 2005 (2) JCR 1. Learned counsel for the
petitioner further submitted that an arbitrator, being appointed by this Court,
had passed an award on 10th October, 2007 arising out of A.A. No. 33 of 2004
involving eleven agreements. Against that award, the State Government has
preferred objection under Section 34 of the Act, 1996 before learned
Subordinate Judge-I, Ranchi, who has partly allowed the application, preferred
by the State, and the amount of Rs. 1,50,000/- which was allowed with interest
by the arbitrator has been quashed and set aside, whereas, rest of the amount
awarded by the arbitrator has been confirmed and, therefore, let the respondents
may be directed to make the payment of remaining amount of the arbitral
award, deducting Rs. 1,50,000/- and interest thereupon, within stipulated time.
3. I have heard learned counsel appearing for the respondents, who has
submitted that the order passed by the trial court is in consonance with the facts
and law and extra work, which was done by the petitioner (opposite
party/claimant) was never agreed between the parties and, therefore, he was not
entitled for Rs. 1,50,000/- and interest thereupon. This aspect of the matter has
been correctly appreciated by the trial court and, therefore, to that extent,
rightly arbitral award has been quashed and set aside. It is further submitted by
learned counsel for the respondents that looking to the provision of Section 2
(e) of the Act, 1996, it appears that if a subject-matter of arbitral award is to be
converted into a suit, then the suit will have to be filed before learned
Subordinate Judge-I, Ranchi as a subject-matter involving the amount of more
than Rs. 30,000/- and, therefore, the Subordinate Judge has all power,
jurisdiction and authority to decide the application, preferred by the State, under
Section 34 of the Act, 1996 for quashing and setting aside the arbitral award. It
is also submitted by learned counsel for the respondents that the arbitrator,
appointed by the order of this Court under Section 11 (6) of the Act, 1996, is an
administrative order as per the decision rendered by this Court as reported in
AIR 1999 SC 3246 and, therefore, as per Section 42 of the Act, 1996, the
Hon'ble Chief Justice of this Court exercising powers under Section 11 of the
Act, 1996 is not a Court, as has been held in AIR 2002 Bombay 8. It is further
submitted by learned counsel for the respondents that as per the decision
rendered by the Hon'ble Supreme Court as report in AIR 2005 SC 1514, it has
been held that if the subject matter of the arbitral award is to be converted into
the suit and if the suit is to be filed before a principal civil Court of any place,
then that Court shall have jurisdiction. Arbitrator might have been appointed
by the Hon'ble High Court or by the Hon'ble Supreme Court, but, an application
under Section 34 of the Act, 1996 will be filed before principal civil Court,
which is having a jurisdiction upon a subject-matter of the arbitral award in
stead of an arbitrator and, therefore, no error has been committed by the trial
court in entertaining the application, preferred by the State under Section 34 of
the Act, 1996.
4. Having heard learned counsels for both the sides and looking to the facts
and circumstances of the case, I see no reason to entertain this writ petition
mainly for the following facts and reasons:-
(i) It appears from the facts of the case that originally there was an
agreement between the parties for execution of a work. There were
several agreements for repair work of the office, buildings and quarters at
Ranchi. Disputes arose between the parties and the application preferred
before this Court for appointment of an arbitrator under Section 11 of the
Arbitration and Conciliation Act, 1996. The arbitrator was appointed by
order of this Court.
(ii) Thereafter, both the parties had appeared before the arbitrator and
arbitral award was given in A.A. Case No. 33 of 2004 on 10th October,
2007.
(iii) It further appears from the facts of the case that the respondent-State
has preferred an application under Section 34 of the Act, 1996 for setting
aside the arbitral award before learned Subordinate Judge-I, Ranchi.
(iv) It further appears from the facts of the case that learned Subordinate
Judge-I, Ranchi has disposed of the application, preferred under Section
34 of the Act, 1996 vide order dated 8th September, 2009, whereby,
partly the arbitral award has been quashed and set aside, to the extent, to
which the payment was directed for extra work, done by the petitioner
(opposite party/claimant), which is at about Rs. 1,50,000/-. Thus, except
the amount of Rs. 1,50,000/-, rest of amount with interest thereupon has
been confirmed. This order has been challenged by the petitioner
(opposite party/claimant).
(v) Now, the question to be decided by this Court is, which is the
competent Court, which can decide application under Section 34 of the
Act, 1996. Section 2 (e) of the Act, 1996 reads as under:-
"2(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."
(emphasis supplied)
Upon reading of the aforesaid sub-Section with Section 34 of the Act,
1996, it appears that application for setting aside the arbitral award can
be preferred before a Court, which is a Court within the meaning of
Section 2 (e) of the Act, 1996 and as per Section 2 (e), a Court means the
principal civil Court of the original jurisdiction (in a district) having
jurisdiction to decide the question forming the subject-matter of the
arbitration, had a suit been filed in stead of taking the matter before the
arbitrator. It can even before a High Court, which exercise its ordinary
original civil jurisdiction, upon a subject matter of arbitration, had a suit
been filed in stead of going before an arbitrator. Thus, in the facts of the
present case, the dispute between the parties is pertaining to the amount
to be paid because of the several agreements. Dispute between the
parties is for repairing work of several buildings and quarters of the
Government at Ranchi and payment of considerations. Applying these
tests, if parties would have gone to a Court in stead of going before an
arbitrator, before which Court, they have to file their suit. Obviously, it
will be a Subordinate Judge at Ranchi because the amount involved in
the dispute between the parties is more than Rs. 30,000/-. The High
Court of Jharkhand is not having any ordinary original civil jurisdiction
upon the subject-matter of an arbitration.
(vi) It has been held by the Hon'ble Supreme Court in the case of
National Aluminium Co. Ltd., v. M/s Pressteel and Fabrications Pvt.
Ltd. and another as reported in AIR 2005 SC 1514. Paragraphs 8 and 9
of the said decision read as under:-
"8. It is to be noted that as per the above order, this Court has not
retained any power or control over the arbitration proceedings while
appointing the arbitrator by consent of parties, on the contrary, it
seems this Court has merely recorded a submission of the parties as to
their agreement in appointing a particular arbitrator. Even the time
limit fixed therein is only a request to the learned arbitrator to
conclude the proceedings within 3 months from the day he enters
upon the arbitration and it is not a mandate in the sense that the
failure to do so would have entitled the parties to approach this
Court for suitable remedy. On facts, it is admitted that the learned
arbitrator has extended the time suo motu a few times before making
the award, without reference to this Court, therefore, it is clear on
facts of this case that it is the arbitrator who had the control over the
proceedings and not this Court. Therefore, in our opinion, the two
judgments relied on by the applicant do not help the applicant
because in those judgments this Court had held that while appointing
an arbitrator this Court had retained control over the arbitral
proceedings, therefore, under the provision of the 1940 Act, it was this
Court which could entertain an application for making the award
a rule of the Court and not any other Court.
9. The next question to be considered by us in this application is
whether the dispute having arisen prior to the coming into force of
the 1996 Act and the proceedings having continued under the
provisions of the 1996 Act, would the provisions of the 1940 Act still
be applicable for making an application for the modification of the
award, and if so, before which Court. First part of this issue need
not detain us because of the admitted fact that by consent of the
parties provisions of 1996 Act have been made applicable to the
proceedings which is in conformity with Section 85 (2)(a) of 1996
Act, hence, it is futile to contend that for the purpose of challenge to
the Award 1940 Act will apply. Hence, we reject this contention. In
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 that 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.
(emphasis supplied)
Thus, in view of the aforesaid decision also, though the arbitrator was
appointed by the Hon'ble Supreme Court, application under Section 34 of
quashing and setting aside the arbitral award was not allowed to be filed
before the Hon'ble Supreme Court, but, it has been held that only a
principal civil Court of the original jurisdiction in a district having a
jurisdiction to decide the questions forming the subject-matter of the
arbitration. Thus, in the facts of the present case also upon a subject-
matter of an arbitral award, had there been no arbitration and only a suit
is to be filed, it ought to have been filed before Subordinate Judge,
Ranchi and, therefore, only that Court has power, jurisdiction and
authority to entertain an application under Section 34 of the Act, 1996.
This aspect of the matter has been correctly appreciated by the trial court
while passing an order dated 8th September, 2009 in Miscellaneous Case
No. 07 of 2008 (Annexure-4 to the memo of petition).
(vii) It has been held by the Hon'ble Madras High Court in the case of
M/s Sundaram Finance Ltd. v. M.K. Kurian & Anr. as reported in
AIR 2006 MADRAS 218. Paragraphs 5,6,7 and 8 of the said decision
read as under:-
"5. So far as the city of Chennai is concerned, the ordinary original
civil jurisdiction is vested in the High Court and not in the City Civil
Court. The very preamble of the Chennai City Civil Court Act speaks
of establishment of an additional Civil Court for the city of Chennai.
It is the civil Court of limited pecuniary jurisdiction having power to
deal with the matters involving the value of less than Rs. 10 lakhs,
whereas under Clause 12 of the Letters Patent, the High Court has
unlimited original jurisdiction and this jurisdiction was expressly
saved under Section 16 of the Chennai City Civil Court Act.
Competency embodied by this Section is pecuniary competency and it
has been held that this Section lays down a rule of procedure and not
of jurisdiction. While it enjoins the institution of a suit in the Court of
the lowest grade competent to try it, it does not oust the jurisdiction
of the Court of a higher grade. Even if the Court of a higher grade
tries and disposes of a suit which could have been instituted in a
Court of a lower grade, the decision rendered is not without
jurisdiction, See Ramamirtham v. Rama Film Service, AIR 1951
Madras 93 (FB). It is thus clear that as far as the City of Chennai is
concerned, the words "principal civil Court of original jurisdiction",
as defined in Section 2(1)(e) of the Act, would mean the High Court
exercising jurisdiction on the original side and not the City Civil
Court. Moreover, the interpretation suggested by the learned single
Judge would mean that there would be two principal civil Courts, i.e.
the High Court and the City Civil Court and such an interpretation is
clearly ruled out by the words "but does not include any civil Court
of a grade inferior to such principal civil Court."
6. A reference may also be made to a decision of the Supreme Court
in Raja Soap Factory v. S.P. Shantharaj, AIR1965 SC 1449, wherein
the Supreme Court, while construing the definition of the "District
Court" under Section 2(e) of the Trade and Merchandise Marks Act,
1958, has observed in Para 3 as follows:-
"3. ......... The expression "District Court" has by virtue of S.
2(3) of Act 43 of 1958 the meaning assigned to that expression in
the Code of Civil Procedure, 1908. Section 2(4) of the Code
defines a "district" as meaning the local limits of the jurisdiction of
a principal civil Court-called the District Court-and includes
the local limits of the ordinary original civil jurisdiction of a High
Court. If, therefore, a High Court is possessed of ordinary
original civil jurisdiction, it would, when exercising that
jurisdiction be included, for the purpose of Act 43 of 1958, in the
expression "District Court".
(emphasis supplied)
7. Similar is the view taken by the Division Bench of this Court in
D.C.S. Bureau v. United Concern, AIR 1967 Madras 381, wherein it
has been held that the term "District Court", as defined in Section
62(1) of the Copyright Act, should be given the same meaning as in
Section 2(4) of the Code of Civil Procedure and that as far as the
area of the Presidency Town of Madras is concerned, the High Court
exercising its original civil jurisdiction over the city limits and not the
City Civil Court.
8. Therefore, the view taken by the learned single Judge that the City
Civil Court should be regarded as the principal Court of Civil
jurisdiction under Section 2(1)(e) of the Act in matters involving
value of less than Rs. 10 lakhs is clearly erroneous and cannot be
sustained."
(emphasis supplied)
Thus, in view of the aforesaid decision also, application under Section
34 of the Act is tenable before a Court, which is a Court within the
meaning of Section 2(e) of the Act, 1996 means principal civil Court in a
district having a jurisdiction to decide the questions forming the subject-
matter of the arbitration, if a suit is filed in stead of going before an
arbitrator. This High Court has no ordinary original civil jurisdiction to
try a suit, upon a subject-matter of arbitral award.
(viii) Learned counsel for the petitioner has vehemently submitted that
as this Court has appointed an arbitrator under Section 11(6) of the Act,
1996 and, therefore, an application under Section 34 ought to have
preferred before this Court. This contention is not accepted by this Court
mainly for the reason that this Court having no ordinary original civil
jurisdiction upon the subject-matter of arbitration, if a suit is to be filed
upon the subject-matter of an arbitration, in stead of going before an
arbitrator. Otherwise, in all the matters after the Arbitration and
Conciliation Act, 1996 is brought into effect, in each and every case,
applications under Section 34 will have to be preferred before High
Court, whenever High Court is appointing arbitrator under Section 11 of
the Act, 1996. It is to be kept in mind that an order of appointment of an
arbitrator is not an order of Court, but, it is an administrative order and
the Hon'ble Chief Justice of this Court while exercising power under
Section 11 of the Act, 1996 is not a Court within the meaning of Section
2(e) of the Act, 1996 and, therefore also, the contention raised by the
learned counsel for the petitioner is not accepted by this Court.
(ix) Learned counsel appearing for the petitioner has relied upon the
decision rendered by the Hon'ble Supreme Court in the case of
MCDERMOTT INTERNATIONAL INC. versus BURN
STANDARD CO. LTD. AND OTHERS as reported in (2005) 10 SCC
353. Looking to the peculiar facts of the aforesaid case, the decision
rendered in that decision is not applicable to the facts of the present case.
Paragraph 3 of the aforesaid judgment says as under:-
"3. In the order dated 28-8-1998 passed by this Court appointing
the arbitrator, it was made clear that:
"9. The learned arbitrator shall file the award in this Court.
10. Any application which may become necessary to be filed
during or after the conclusion of arbitration proceedings, shall be
filed only in this Court."
(emphasis supplied)
In view of the aforesaid facts, it appears that while appointing an
arbitrator under Section 11 of the Act, 1996 by the Hon'ble Supreme
Court, it was directed that the arbitral award shall be filed before the
Hon'ble Supreme Court. This fact makes the present case different from
the facts of the decided case and, hence, the aforesaid decision is not
applicable in the facts of the present case. While appointing an arbitrator
by this Court, never an order was passed that an arbitrator shall file an
award before this Court. Moreover, further looking closely to the
aforesaid paragraph 3 of the decided case, it appears that there was a
direction by the Hon'ble Supreme Court that any application is to be filed
during or after conclusion of the arbitral proceeding, it shall be filed only
before the Hon'ble Supreme Court. Thus, this fact also makes the
present case different, from the facts of the aforesaid decided case.
Never any direction was given by this Court that if any application is to be
filed during or after the conclusion of the arbitration proceeding, it
shall be filed only in this Court. Thus, the aforesaid decided case is not
applicable to the facts of the present case.
(x) Learned counsel appearing for the petitioner has also relied upon the
decision rendered by this Court in the case of Ram Prasad Sharma
Versus Jharkhand State Housing Board & Ors. as reported in 2005
(2) JCR 1. This judgment was also passed upon altogether different
facts. Paragraphs 11 and 12 of this judgment read as under:-
"11. In the instant case, although the dispute and differences were
not referred to arbitration strictly in terms of Section 8 of the Act,
but the fact remains that action was brought in the matter which is a
subject of arbitration agreement before this Court, in a writ petition
invoking jurisdiction under Article 226 of the Constitution. On the
first hearing of the writ petition it was brought to the notice of the
Court that dispute is to be adjudicated by the named Arbitrator in
terms of the arbitration agreement contained in the agreement.
Although, in my opinion, the parties ought to have directed to make a
request to the Hon'ble Chief Justice or his delegate seeking a
reference as contemplated in Section 11 of the said Act, but instead
of that this Court referred the dispute to the named Arbitrator for
adjudication. The order dated 4.12.2003 passed in W.P.(C) No. 5870
of 2003 reads as under :
"Heard learned counsel for the petitioner and learned counsel
appearing for Jharkhand State Housing Board.
The petitioner has prayed for quashing the demands issued by
the respondent No. 3 as contained in letter No. 120 dated
12.5.2003(Annexure-12) and also the demand as contained in letter No. 569 dated 17.5.2003 (Annexure-13) issued by the respondent No. 2. Petitioner's case is that he is not liable to pay the enhanced price of MIG Flats on the grounds mentioned in the writ petition. It is further submitted that against the said demands, the petitioner has made representation before the Managing Director on 9.9.2003 but no order has been passed on that.
Learned counsel for the Housing Board submitted that the demand is based on the basis of the final fixation of price, which has to be paid by the petitioner. However he submitted that in terms of Clause 25 of the Hire Purchase Agreement, the petitioner may invoke arbitration clause. He fairly submitted that the Managing Director, is expected to pass a speaking order as an arbitrator, and till then the said demand will not be enforced. In view of the said stand taken by the Housing Board the matter is referred to the arbitration to the Managing Director, Housing Board in terms of Clause 25 of Hire Purchase Agreement. The petitioner will file his statement of claim along with supporting documents before the Arbitrator within two weeks and the Housing Board will also file its statement of claim within two weeks thereafter. The Arbitrator will hear the parties and decide the matter by giving reason in accordance with law. The parties will co-operate in the proceeding.
Till a decision is taken by the Arbitrator, the impugned demand shall not be enforced.
It is made clear that this Court has not gone into the merits of the case.
With these observations and directions, this writ petition is disposed of."
12. It is, therefore, clear that there is technical non-compliance by the parties to the agreement in not requesting the Chief Justice or his delegatee, but in my opinion, because of non-compliance the entire arbitration proceeding and the Award cannot be vitiated. Such an Award shall be deemed to be an arbitral Award as defined in the Act. The said Award, therefore, can be challenged before this Court under Section 34 of the Act of 1996.
(emphasis supplied) In view of the aforesaid paragraphs, it appears that there was no order of this Court under Section 11 for appointment of an arbitrator. Never any application was preferred under Section 11 of the Act, 1996, before this Court. In the aforesaid decision while exercising power under Article 226 of the Constitution of India, an order was passed for the appointment of an arbitrator and, therefore, it was allowed that an application under Section 34 of the Act, 1996 can be preferred before the High Court. These facts are absolutely different from the facts of the present case. In the present case, arbitrator was appointed under Section 11 of the Act, 1996 for a dispute between the parties and, therefore, under Section 34 any application for setting aside the arbitral award ought to be preferred before a Court, which is a Court within the meaning of Section 2(e) of the Act and as per Section 2(e) of the Act, a principal civil Court in a district having a jurisdiction upon the subject- matter of the arbitral award, had a suit been filed in the arbitration proceeding, it would have been a Court for preferring an application under Section 34. In the facts of the present case as stated hereinabove, the subject-matter of the dispute between the parties is pertaining to the breaches of agreement or the non-payment of the amount under the agreement for repairing several quarters and office buildings of the State, situated at Ranchi. Thus, had a suit been filed by the parties, it would have been a Court of Subordinate Judge at Ranchi, which is having a original civil jurisdiction upon the subject-matter of the dispute, which is decided by the arbitrator.
(xi) Learned counsel appearing for the petitioner has also submitted that as per Section 42 of the Act, 1996, only this Court is having a jurisdiction to entertain an application under Section 34 of the Act especially when arbitrator is appointed by this Court under Section 11(6) of the Act. This contention is also not accepted by this Court because this Court or the Hon'ble Chief Justice of this Court, while exercising power under Section 11, is not a Court within the meaning of Section 2(e) and, therefore, even though arbitrator is appointed by this Court under Section 11(6) of the Act, 1996, this Court, as this Court, is not having ordinary original civil jurisdiction upon a subject-matter of the arbitration proceeding, if a suit would have been filed instead of arbitration proceeding, no application can be preferred before this Court under Section 34 of the Act, 1996. This aspect of the matter has been properly appreciated by the trial court while passing the impugned order.
(xii) Learned counsel appearing for the respondent-State submitted that the impugned order which is passed under Section 34 of the Act, 1996 is an appellable order under Section 37 of the Act, if there is any grievance by the petitioner (original opposite party/claimant). An appeal could have been preferred by the petitioner under Section 37 of the Act, 1996. It is fairly submitted by learned counsel for the respondent-State that out of the total arbitral award except Rs. 1,50,000/- and interest thereupon, rest of the amount to the tune of Rs. 7,48,926/- shall be paid to the petitioner, within stipulated time as given by this Court and they are in process of making this payment.
5. As a cumulative effect of the aforesaid facts, reasons and judicial pronouncements, this writ petition is, hereby, dismissed with a direction to the respondent-State to make the payment of remaining arbitral award amount along with interest to the petitioner.
6. Learned counsel for the petitioner submitted that the arbitrator has awarded the amount of Rs. 8,98,926/- and deducting Rs. 1,50,000/- as per the impugned order, outstanding amount payable to the petitioner, is Rs. 7,48,926/-.
7. I hereby direct the respondents that outstanding amount will be paid to the petitioner, as per award of arbitrator, within a period of four weeks from the date of receipt of a copy of the order of this Court and liberty is reserved with the petitioner to challenge the impugned order by way of an appeal under Section 37 of the Act, 1996 as, partly arbitral award has been quashed and set aside, which was otherwise in favour of the present petitioner.
(D.N. Patel, J) Ajay/