Jharkhand High Court
The State Of Jharkhand Through The ... vs M/S. B.M.S. Associates on 18 April, 2022
Author: Rajesh Shankar
Bench: Rajesh Shankar
1
IN THE HIGH COURT OF JHARKHAND AT RANCHI
W.P.(C) No.4132 of 2018
With
I.A. No.7216 of 2021 & I.A. No.508 of 2022
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1. The State of Jharkhand through the Deputy Commissioner, Seraikella Kharsawan.
2. The Chief Engineer, Subernrekha Multipurpose Project, Chandil Complex, Subernrekha Bhawan, Adityapur, Jamshedpur.
3. The Superintending Engineer, Subernrekha Canal Circle, Jamshedpur.
4. The Executive Engineer, Subernrekha Canal Division, Chandil.
.......... Petitioners.
-Versus-
M/s. B.M.S. Associates, 11, MIG Adarsh Nagar, Sonari, Jamshedpur, through its partner Sri B. N. Dikshit.
.......... Respondent.
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CORAM : HON'BLE MR. JUSTICE RAJESH SHANKAR
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For the Petitioners : Mr. Sachin Kumar, AAG-II,
Mr. Gaurav Raj, A.C. to AAG-II
For the Respondent : Mr. Ajit Kumar, Sr. Advocate
Mr. Indrajit Sinha, Advocate
Mr. Shresth Gautam, Advocate
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Order No.12 Date: 18.04.2022
1. The present writ petition has been preferred for quashing the order dated 15.02.2019 passed by the Civil Judge (Senior Division-II), Seraikella in Money Suit No.07 of 2010(S), whereby the learned court below has appointed Vijay Kumar Srivastava, retired In-charge Chief Engineer, Rural Works Department, Government of Jharkhand as an arbitrator by recalling the earlier order dated 20.01.2018 whereby Late Anil Kumar, retired Chief Engineer, Government of Jharkhand was appointed as sole Arbitrator.
2. The factual background of the case, as stated in the writ petition, is that the respondent filed a suit being Money Suit No.07 of 2010 in the Court of Sub-Judge, Seraikella against the petitioners seeking a decree of Rs.56,17,093/-, as detailed in schedule A, B and C of the plaint and also for cost of the suit. The petitioners filed an application before the said Court on 12.10.2012 through Additional Government Pleader (AGP) for referring the matter to an arbitrator under Clause 23 of the conditions of contract of the agreement, whereupon the court below vide order dated 22.04.2015 appointed Superintending Engineer, Subarnrekha Canal Circle, Jamshedpur (petitioner no.3/defendant no.3) as an arbitrator. The respondent filed a petition on 24.11.2017 under Section 2 151 CPC for modification of the order dated 22.04.2015, stating that after insertion of a new provision i.e. Section 12(5) by way of amendment in the Arbitration and Conciliation Act, 1996 (hereinafter to be referred as 'the Act, 1996'), which had come into force with effect from 23.10.2015, the Superintending Engineer, Subarnrekha Project could not have acted as an arbitrator. Subsequently, the petitioners filed rejoinder to the petition filed by the respondent on 12.01.2018 through the Government Pleader (GP), praying, inter alia, to recall the order dated 22.04.2015 and to appoint any other person as neutral arbitrator for which the petitioner had no objection. Thereafter, the petitioners and the respondent filed a joint petition before the court below providing name of an arbitrator to decide the dispute, whereupon the court below vide order dated 20.01.2018 appointed one Anil Kumar, retired Chief Engineer, Government of Jharkhand as an arbitrator. In the meantime, the petitioners filed the present writ petition on 16.08.2018 with a prayer to quash the order dated 20.01.2018 passed by the Civil Judge (Senior Division-II), Seraikella. The petitioners also filed an application under Section 16 of the Act, 1996 before the Arbitrator, raising objection to his jurisdiction, which was rejected vide order dated 10.08.2018. The said arbitrator thereafter died on 11.10.2018. The respondent then filed an application under section 42 of the Act, 1996 for appointment of a new arbitrator. The said application was allowed by the court below vide order dated 15.02.2019, appointing one Vijay Kumar Srivastav, retired In-charge Chief Engineer, Rural Works Department, Government of Jharkhand as new arbitrator. Thereafter, the petitioners filed amended writ petition praying, inter alia, to quash of the order dated 15.02.2019.
3. Mr. Sachin Kumar, learned A.A.G.II, appearing on behalf of the petitioners submits that on conjoint reading of Clause 20 (engineer's decision) of the General Conditions of Contract (GCC), as mentioned in the tender document relating to residual earth work from k.m. 9.0236 to k.m. 9.144 of Subarnrekha Left Main Canal and Clause 23 of the Conditions of Contract as mentioned in Agreement no.1 F2 of 1999- 2000 relating to the aforesaid work, it would appear that the Superintending Engineer has been vested with certain powers as an 'in- house procedure' to resolve the dispute relating to matters of technical consideration in course of execution of the contract. Clause 20 of GCC further makes it clear that the Superintending Engineer's final authority 3 does not include decisions regarding sum due to or from the contractor or for extension of time. It is submitted that by no stretch of imagination, the said Clause 23 can be said to be an agreement clause of arbitration to arbitrate between the parties. It is also submitted that for any arbitration agreement to be binding in nature upon the parties, the same must be in writing and the parties should have specifically agreed to settle their disputes by arbitration. An arbitration agreement cannot be interfered by implication. It is further submitted that during pendency of the present writ petition, a notice under section 34(5) of the Act, 1996 has been served to the respondent as precautionary measures and as such the same may not be taken into consideration by this Court for deciding the present writ petition.
4. It is further submitted that in the case of Food Corporation of India Vs. National Collateral Management Services Limited, reported in 2020 SCC Online SC 1824, the Hon'ble Supreme Court has held that the clauses in agreement which merely predicate that the dispute between the parties shall be referred to the Chairman and Managing Director of Food Corporation of India for settlement cannot be construed as arbitration clauses.
5. Learned A.A.G.II puts reliance on the judgment of the Hon'ble Supreme Court rendered in the case of Municipal Corporation of Greater Mumbai & Another Vs. Pratibha Industries Limited & Others, reported in (2019) 3 SCC 203 and submits that if there is no arbitration agreement, then the provisions of the Act, 1996 would not apply.
6. Learned A.A.G.II further puts reliance on the judgment rendered by the Hon'ble Supreme Court in the case of Kerala State Electricity Board and Another Vs. Kurien E. Kalathil & Another, reported in (2018) 4 SCC 793, wherein it has been held that the High Court ought not to have referred the parties to arbitration without a joint memo or a joint application of the parties when there was no arbitration agreement between them.
7. It is further submitted that the erstwhile State of Bihar vide letter dated 03.07.1993 had clearly decided to delete Clause 23 of the Conditions of Contract as mentioned in Form F2 of agreement of Public Works Department, however, due to inadvertence the said clause could not be deleted in the agreement dated 07.02.2000. Moreover, Clause 23 was specifically deleted from the conditions of contract mentioned in the 4 supplementary agreement dated 10.09.2007 and both the parties had signed the same. Otherwise also the decision of the State Government will prevail even if clause 23 could not be deleted in the first agreement.
8. It is also submitted that in the case of Wapcos Ltd. Vs. Salma Dam Joint Venture & Another [S.L.P(C) No. 7979 of 2019], the Hon'ble Supreme Court has held that the parties can amend the original contract and may give up their claims under the subsisting agreement. Where the parties consciously and with full understanding executes Amendment of Agreement (AoA) whereby the contractor gives all his claims and consents to the new arrangement specified in AoA including that there will be no arbitration for the settlement of any claims by the contractor in future, then it is not open to the contractor to take recourse to arbitration process or to resurrect the claim which has been resolved in terms with the amended agreement. It has further been held that the Court cannot create a contract for the parties or improve the terms of the contract only because it is more beneficial for the parties.
9. It is further contended on behalf of the petitioners that the court below had no power to appoint arbitrator, rather the power is vested with Hon'ble the Chief Justice of this Court in view of Section 11 of the Act, 1996. Section 8 of the Act, 1996 empowers the judicial authority to refer the parties before an arbitrator for arbitration, if there is valid arbitration agreement between them. The court below has failed to differentiate between reference to arbitration and appointment of arbitrator.
10. Learned A.A.G.II further submits that the Hon'ble Supreme Court in the case of Union of India Vs. Parmar Construction Company, reported in (2019) 15 SCC 682, has held that conjoint reading of section 21 of the Act, 1996 and section 26 of the Amendment Act, 2015 leaves no manner of doubt that the provisions of the Amendment Act, 2015 shall not apply to such a arbitral proceeding which has already commenced in terms with the provisions of Section 21 of the Principal Act unless the parties otherwise agree. It is thus submitted that the appointment of Anil Kumar and Vijay Kumar Srivastava as arbitrator(s) in view of the provisions of the Act, 2015 is in the teeth of judgment rendered by the Supreme Court in the aforesaid case.
11. In support of the aforesaid contentions, the learned A.A.G.II also puts reliance on the following judgments rendered by the Hon'ble Supreme Court:-
5(i) State of Orissa Vs. Bhagyadhar Dash, reported in (2011) 7 SCC 406.
(ii) P. Dasaratharama Reddy Complex Vs. Govt. of Karnataka, reported in (2014) 2 SCC 201.
(iii) Karnataka Power Transmission Corporation Ltd. Vs. Deepak Cables Ltd., reported in (2014) 11 SCC 148.
12. Per contra, the learned senior counsel for the respondent submits that the petitioners themselves accepted the existence of arbitration clause in the agreement on different occasions, however, the said fact has been suppressed by them in the writ petition. Hence, they have not come before this Court with clean hands. The petitioners have deliberately suppressed the fact that initial reference of the dispute was made to the Superintending Engineer, Subarnrekha Circle, Jamshedpur under section 8 of the Act, 1996 on the application of the petitioners themselves filed through AGP. The petitioners have also suppressed the fact that the application of substitution of the arbitrator filed by the respondent was also not objected by them and even a joint petition was filed by the GP on behalf of the petitioners as well as the respondent, whereupon the learned Civil Judge (Sr. Division-II), Seraikella appointed said Anil Kumar as an arbitrator. The present writ petition is, thus, liable to be dismissed on the said score alone.
13. It is further submitted that earlier the appointment of arbitrator was challenged by the petitioners under section 16 of the Act, 1996 on the ground that the amendment made in the year 2015 is prospective in nature. The learned senior counsel for the respondent puts reliance on the judgments rendered by the Hon'ble Supreme Court in the cases of Narayan Prasad Lohia Vs. Nikunj Kumar Lohia & Others, reported in (2002)3 SCC 572, and Quippo Construction Equipment Limited Vs. Janardan Nirman Private Limited, reported in (2020)18 SCC 277, and submits that the petitioners had not raised the issue which were subsequently being agitated before the arbitrator while challenging his jurisdiction under section 16 of the Act, 1996 and thus they have waived their right to make such objection by virtue of section 4 of the Act, 1996. It is further submitted that the petitioners have not even challenged the appointment of the present arbitrator i.e. Vijay Kumar Srivastav.
14. It is also contended that the grievance of the petitioners is with respect to the jurisdiction of the arbitral tribunal which was also raised by filing 6 application under section 16 of the Act, 1996 and a party aggrieved by the decision of the arbitral tribunal can only challenge the award so rendered under section 34 of the Act, 1996 and as such the said alternative remedy being available to the petitioners, the writ petition is not maintainable. In fact, the writ petition has stood infructuous after passing of the award in the arbitration proceeding.
15. In support of the aforesaid contentions, the learned senior counsel for the respondent puts reliance on the following judgments rendered by the Hon'ble Supreme Court:-
(i) S.B.P & Co. Vs. Patel Engineering Ltd. and Another, reported in (2005)8 SCC 618.
(ii) Deep Industries Limited Vs Oil and Natural Gas Corporation Limited and Another, reported in (2020)15 SCC 706.
(iii) A. Ayyasamy Vs. A. Paramasivam & Others, reported in (2016)10 SCC 386.
16. Learned senior counsel for the respondent also submits that the Hon'ble Supreme Court in the case of Bhaven Construction through Authorized Signatory Premjibhai K. Shah Vs. Executive Engineer, Sardar Sarovar Narmada Nigam Limited and Another, reported in (2022)1 SCC 75, has held that when the Act, 1996 provides for alternative remedy of filing an application under Section 34 of the Act, 1996 for setting aside the award passed by the arbitrator, then High Courts should not interfere in the arbitral process beyond the ambit of the Act, 1996.
17. It is further submitted on behalf of the respondent that in the present writ petition, the petitioners have only challenged the order dated 15.02.2019 passed by the Civil Judge (Senior Division II), Seraikella, whereby the appointment of arbitrator, namely, Anil Kumar was substituted by Vijay Kr. Srivastav and not the actual order of referring the dispute for arbitration under section 8 of the Act, 1996, which has now attained its finality. Thus, the petitioners cannot be allowed to claim that there was no arbitration clause in the agreement.
18. Learned senior counsel for the respondent further submits that Clause 23 of the agreement entered into between the parties stipulated that the disputes arising between them had to be adjudicated by way of arbitration before a sole arbitrator which as per the contract was the Superintending Engineer of the concerned circle. Moreover, it is wrong 7 to say that Section 12(5) of the Act, 1996 (as inserted vide amendment with effect from 23.10.2015) has no implication in the present case. The Hon'ble Supreme Court in the case of Bharat Broadband Network Limited vs. United Telecoms Limited , reported in (2019)5 SCC 755, has held that section 12(5) of the Act, 1996 is a new provision which relates to the de jure inability of an arbitrator to act as such. Under this provision, any prior agreement to the contrary is wiped out by the non obstante clause of Section 12(5) the moment any person whose relationship with the parties or the counsel or the subject matter of the dispute falls under the Seventh Schedule of the Act, 1996.
19. It is also submitted that in the case of Ellora Paper Mills Vs. State of M.P., reported in 2022 SCC OnLine SC 8, the Hon'ble Supreme Court has held that section 12(5) will come into play even in those cases where though the arbitral tribunal is constituted but no further steps have been taken in the same and as such the arbitral proceedings cannot be said to have commenced. In the present case also after the constitution of the arbitral tribunal, no further steps was taken and the said fact has itself been recorded in the order of the court below dated 20.01.2018 whereby the joint application filed by the parties was disposed of.
20. According to the learned senior counsel, the petitioners' claim that the consent for referring the dispute to arbitration was granted by the AGP and not by the State authorities is absolutely false and incorrect. It is highly improbable that the AGP acted without the instruction of the State authorities. Moreover, the petitioners also participated in the arbitration proceedings before the Sole Arbitrator and only after a period of almost 4 months, they raised their objection under section 16 of the Act, 1996. It is apparent from the facts that the petitioners were well aware and cognizant of the fact that disputes had to be arbitrated and they had consented to the same accordingly. The petitioners have not made any pleading to the effect that they did not give consent to the arbitration proceedings and as such they may not be allowed to raise altogether a new case before this Court.
21. It is further submitted by the learned senior counsel that different Benches of this Court in the cases of Lakeshwari Builders Pvt. Ltd. Vs. State of Jharkhand & Ors., reported in 2006 SCC OnLIne Jhar 476; Sharda Construction Vs. State of Jharkhand & Ors., reported in 2004 SCC OnLine Jhar 587; and Vijeta Projects and 8 Infrastructure Ltd. Vs. State of Jharkhand, reported in 2018 SCC OnLine Jhar 1583, have held that unilateral deletion of arbitration clause vide a separate instrument does not affect the arbitration clause in the contracts and as such application under section 11(6) of the Act, 1996 for appointment of arbitrator is maintainable.
22. Heard learned counsel for the parties and perused the materials available on record. Initially, the petitioners had filed the writ petition for quashing the order dated 20.01.2018 passed by the court below whereby Anil Kumar, retired Chief Engineer, Government of Jharkhand was appointed as an arbitrator to hear the dispute between the parties. However, during the pendency of the writ petition, the petitioners amended the prayer to the extent of quashing the order dated 15.02.2019, whereby Er. Vijay Kumar Srivastava, retired In-charge Chief Engineer, Rural Works Department, Government of Jharkhand was appointed as new arbitrator due to death of the earlier arbitrator- Anil Kumar during pendency of the arbitration proceeding.
23. Thrust of the argument of learned A.A.G.II appearing on behalf of the petitioners is that the court below failed to appreciate that Clause 23 of the agreement is not an arbitration clause, rather the same provides for an 'in-house' procedure to resolve the dispute relating to technical specifications, designs, drawings etc. and as such initial order dated 22.04.2015 passed by the court below appointing the Superintending Engineer, Subarnrekha Canal Circle, Jamshedpur as an arbitrator in exercise of the power conferred under section 8 of the Act, 1996 was itself void and as such all the subsequent orders passed by the court below as well as by the arbitrators have no effect in the eyes of law.
24. To counter the said argument, learned senior counsel for the respondent has contended that the petitioners had accepted the existence of arbitration clause in the proceeding before the Civil Judge, Senior Division, Seraikella and had filed an application under section 8 of the Act, 1996. Thereafter, on mutual agreement of the parties, the matter was referred to the Superintending Engineer of the concerned circle and as such the petitioners cannot be allowed to take U-turn and now assert that Clause 23 of the Act, 1996 was not an arbitration clause. Moreover, the order dated 22.04.2015 whereby the Superintending Engineer was appointed as an arbitrator is not under challenge in the present writ petition. Hence, any argument of learned A.A.G.II to that 9 effect may not be entertained by this court. The arbitral tribunal itself has power to entertain objections as to the existence and validity of the arbitration agreement under Section 16 of the Act, 1996. The appointment of Anil Kumar as an arbitrator was challenged by the petitioners under section 16 on altogether different grounds and the same was rejected by the sole arbitrator vide order dated 10.08.2018. Since the award has already been passed by the sole arbitrator on 30.12.2021, the petitioners can challenge the same as well as other orders passed by the arbitrator before the appropriate forum by filing an application under Section 34 of the Act, 1996. The learned senior counsel for the respondent has also submitted that during pendency of the present writ petition, the petitioners have already taken steps to challenge the award dated 30.12.2021 passed by the arbitral tribunal by serving a notice to the respondent under section 34(5) on the same grounds as agitated in the present writ petition. Thus, the writ petition is otherwise not maintainable, as the recourse of an alternative remedy is available to the petitioners.
25. On perusal of the record, it appears that Money Suit No.07 of 2010 was filed by the respondent wherein the AGP appearing on behalf of the defendants/petitioners filed a petition dated 12.10.2012 stating, inter alia, that the said case was arising out of a contract and there being an arbitration clause i.e. Clause 23 of the agreement, prayed that the dispute between the parties could be referred/resolved upon taking recourse of the arbitration agreement. In view of the prayer made in the petition dated 12.10.2012, the dispute was referred by the court below to the Superintending Engineer, Subarnrekha Canal Circle, Jamshedpur vide order dated 22.4.2015 in terms with Clause 23 of the agreement. Curiously enough, the appointment of Superintending Engineer was not objected by the petitioners disputing the existence of arbitration clause i.e. Clause 23 of the agreement. In the meantime, after introduction of section 12(5) of the Act, 1996 with effect from 23.10.2015, the respondent filed a petition before the court below for modifying the order dated 22.04.2015 and to appoint an independent arbitrator. The petitioners replied the said petition by filing a rejoinder affidavit on 12.1.2018 accepting the prayer of the respondent. Moreover, a joint petition was filed on behalf of both the parties through their counsel, whereby they agreed on the appointment of Anil Kumar, retired Chief Engineer as an arbitrator. Having taken note of the stand 10 of the parties, the court below vide order dated 20.01.2018 appointed Anil Kumar as new arbitrator. Thereafter, for the first time, the petitioners filed a petition under Section 16 of the Act, 1996 on 29.05.2018 challenging the appointment of arbitrator on the ground that the basis of the order dated 20.01.2018 was the insertion of Section 12(5) of the Act, 1996, which came into force on and from 23.10.2015 and the same had no retrospective effect whereas the Money Suit was filed much prior to the insertion of the said section. It was further claimed that Clause 23 of the arbitration clause was already deleted and the said fact was duly acknowledged and admitted by the claimant (respondent herein) in the agreement. Thus, at the time of filing of objection under Section 16 of the Act, 1996, the petitioners did not claim that Clause 23 did not provide for arbitration. Ultimately, the objection of the petitioners was rejected by the arbitrator vide order dated 10.08.2018. After the death of the arbitrator, namely, Anil Kumar, one Vijay Kumar Srivastava was appointed as arbitrator vide order dated 15.02.2019 passed by the Civil Judge (Sr. Division-II), Seraikella, who has finally passed the award dated 30.12.2021.
26. It would be evident from the aforesaid facts that the appointment of the Superintending Engineer as an arbitrator was made on the application of the petitioners filed through the AGP. The said appointment was neither challenged before the court below nor before the Superintending Engineer (the first arbitrator) under section 16 of the Act 1996. Here also, the petitioners have not challenged the order dated 22.04.2015 passed by the court below whereby the Superintending Engineer was appointed as an arbitrator. On the one hand, the petitioners have claimed that invocation of Clause 23 of the agreement was void ab initio and, on the other hand, they have failed to challenge the initial/main order passed by the court below. Thus, the argument of learned A.A.G.II on that issue has no substance.
27. This Court is of the view that the judgments cited by the learned A.A.G.II are not applicable in the present case having been passed on different facts. In none of those cases, the parties to the agreement had consented for arbitration on several occasions that too in writing. Moreover, in the case of Bhagyadhar Dash (Supra.), the appointment of arbitrator by Hon'ble the Chief Justice of Orissa High Court, invoking Clause 10 of the Standard Conditions of Contract, was challenged before the Supreme Court on the ground that there was no 11 clause in the Standard Conditions of Contract relating to arbitration. In the said case, it has been held that a reading of Clause 10 shows that it is a clause relating to power of the Engineer-in-Chief to make additions and alterations in the drawings, specifications and execution of non-tendered additional items of work. Paragraph no.23 of the said judgment reads as under:-
"23. That Clause 10 was never intended to be an arbitration agreement is evident from the contract itself. It is relevant to note that the Standard Conditions of Contract of the State Government, as originally formulated, contained a provision (Clause 23) relating to settlement of disputes by arbitration, which is extracted below:
"Except where otherwise provided in the contract, all questions and disputes relating to the meaning of the specifications, designs, drawings and instructions hereinbefore 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, in any way arising out of or relating to the contract, designs, drawing, specifications, estimates, instructions, orders or these conditions, or otherwise concerning the work, or the execution, or failure to execute the same, whether arising during the progress of the work or after the completion or abandonment thereof shall be referred to the sole arbitration of a Superintending Engineer of the State Public Works Department unconnected with the work at any stage nominated by the Chief Engineer concerned. If there be no such Superintending Engineer, it should be referred to the sole arbitration of Chief Engineer concerned. It will be no objection to any such appointment that the arbitrator so appointed is a government servant. The award of the arbitrator so appointed shall be final, conclusive and binding on all parties to this Contract."
(emphasis supplied) Thus, in the aforesaid case, the dispute was referred for arbitration under Clause 10 even after deletion of Clause 23 of the Standard Conditions of Contract. However, in the present case, the matter was referred for arbitration under Clause 23 of the Conditions of Contract, which is identical to Clause 23 of the Standard Conditions of Contract of the aforesaid case about which the Supreme Court has observed that the same was the provision relating to settlement of dispute by arbitration.
28. Further, in the case of Kerala State Electricity Board (Supra.), the Hon'ble Supreme Court has held as under:-
"36. Jurisdictional precondition for reference to arbitration under Section 7 of the Arbitration and Conciliation Act is that the parties should seek a reference or submission to arbitration. So far as reference of a dispute to arbitration under Section 89 CPC is concerned, the same can be done only when parties agree for settlement of their dispute through arbitration in contradistinction to other methods of alternative dispute resolution mechanism stipulated in Section 89 CPC. Insofar reference of the parties to arbitration, oral consent given by the counsel without a written memo of instructions does not fulfil the requirement under Section 89 CPC. Since referring the parties to arbitration has serious consequences of taking them away from the stream of civil courts and subject them to the rigour of arbitration proceedings, in the absence of arbitration agreement, the court can refer them to arbitration only with written consent of parties either by way of joint memo or joint application; more so, when Government or statutory body like the appellant Board is involved.
37. Emphasising that under Section 89 CPC, referring the parties to arbitration could be made only when the parties agree for settlement of the dispute through arbitration by a joint application or a joint affidavit before 12 the Court, in [Afcons Infrastructure Ltd. v. CherianVarkey Construction Co. (P) Ltd., (2010) 8 SCC 24] , this Court held as under :
"33. Even if there was no pre-existing arbitration agreement, the parties to the suit can agree for arbitration when the choice of ADR processes is offered to them by the court under Section 89 of the Code. Such agreement can be by means of a joint memo or joint application or a joint affidavit before the court, or by record of the agreement by the court in the order-sheet signed by the parties. Once there is such an agreement in writing signed by parties, the matter can be referred to arbitration under Section 89 of the Code; and on such reference, the provisions of the AC Act will apply to the arbitration, and as noticed in Salem Bar [Salem Advocate Bar Assn. v. Union of India, (2003) 1 SCC 49] , the case will go outside the stream of the court permanently and will not come back to the court."
(emphasis supplied)
38. The same view was reiterated in [Shailesh Dhairyawan v. Mohan Balkrishna Lulla, (2016) 3 SCC 619] which is as under : (SCC pp. 640-41, para 28) "28. It has been noticed by this Court in some earlier judgments [Ed. : The reference appears to be to Salem Advocate Bar Assn. v. Union of India, (2003) 1 SCC 49; Salem Advocate Bar Assn. (2) v. Union of India, (2005) 6 SCC 344 and Afcons Infrastructure Ltd. v. CherianVarkey Construction Co. (P) Ltd., (2010) 8 SCC 24] that Section 89 CPC is not very happily worded. Be that as it may, Section 89 provides for alternate methods of dispute resolution i.e. those methods which are alternate to the court and are outside the adjudicatory function of the court. One of them with which we are concerned is the settlement of dispute through arbitration. Insofar as reference of dispute to arbitration is concerned, it has been interpreted by this Court that resort to arbitration in a pending suit by the orders of the court would be only when parties agree for settlement of their dispute through arbitration, in contradistinction to the alternate dispute resolution mechanism (for short "ADR") through the process of mediation where the Judge has the discretion to send the parties for mediation, without even obtaining the consent of the parties. Thus, reference to arbitration is by means of agreement between the parties. It is not in dispute that there was an agreement between the parties for reference of dispute to the arbitration and it was so referred."
(emphasis supplied) 49.4. When there was no arbitration agreement between the parties, without a joint memo or a joint application of the parties, the High Court ought not to have referred the parties to arbitration. Hence, the award dated 29-10-2012 passed by the arbitrator Justice K.A. Nayar is set aside and Arbitration Appeal No. Z-47 of 2013 filed by the appellant Board pending before the High Court of Kerala is allowed;"
29. Thus, a case cannot be referred for arbitration on oral agreement of the parties. However, on the joint application of the parties, a dispute may be referred to arbitration even if there is no arbitration agreement. In the case in hand, the record reflects that the petitioners through AGP had made an application in writing to refer the matter to the Superintending Engineer for arbitration and on subsequent occasion made joint application for referring the dispute to Anil Kumar, retired Chief Engineer. Thus, the argument of the learned A.A.G.II that the said reference was void is not tenable.
30. That apart, the award has already been passed in the arbitration proceeding and the petitioners have remedy under section 34 of the Act, 1996 in which they can appropriately challenge the jurisdiction of the arbitrator also and thus they have statutory, efficacious and effective remedy available with them. Moreover, as informed by the 13 learned senior counsel for the respondent, the petitioners have already taken steps for challenging the award by serving a notice to the respondent under section 34(5) of the Act, 1996.
31. The argument of learned A.A.G.II that the AGP had acted without the instruction of the petitioner-State is also not acceptable to this court. It is presupposed that every application filed by the Government Pleader is on the instruction of the State to whom he/she is representing. Moreover, the appointment of arbitrator was consented/accepted on several occasions and it is highly improbable that the State authorities were completely unaware of the stand of the government pleader in the said case. Otherwise also, the said ground of challenge was not taken while making application under section 16 of the Act, 1996 and for the first time the same has been agitated before this Court.
32. The learned senior counsel for the respondent has put reliance on the judgment rendered by the Hon'ble Supreme Court in the case of Y. Sleebachen and Others Vs. State of Tamilnadu & Another, reported in (2015) 5 SCC 747. In the said case, the award of the arbitrator was challenged by filing an application under section 34 of the Act, 1996 which was partly allowed on the basis of compromise memorandum also signed by the Government Pleader. The said compromise was challenged by the State of Tamil Nadu in the High Court claiming that the State had never authorized the Government Pleader to make an endorsement on the compromise memo. The High Court set aside the compromise and directed the Principal District Judge to decide the matter on merit. When the matter travelled to the Hon'ble Supreme Court, their Lordships observed that the Government Pleader was legally entitled to enter into a compromise and his written endorsement on the compromise memo was valid. It was found that no action was taken against the Government Pleader for making the said endorsement who even continued to be in the panel. Their Lordships further observed that no application was filed before the District Court immediately after passing of the compromise decree. Having observed so, Their Lordships finally held that the High Court was not justified in setting aside the consent decree as the same operated as an estoppel and was binding on the parties.
33. In the present case also, the petitioners did not challenge the authority of the AGP in the court below and there is nothing on record to suggest that the AGP had no authority to sign the joint petition for referring the 14 matter to arbitration. Thus, the argument of learned A.A.G.II appearing on behalf of the petitioners to that extent has no leg to stand.
34. Further argument of learned A.A.G.II to the effect that Clause 23 of the Conditions of Contract was subsequently deleted, is also not acceptable to this court since Clause 23 was there in the initial agreement and the petitioners themselves had requested for invocation of the said arbitration clause.
35. In view of the aforesaid discussions, I find no reason to interfere with the order dated 15.02.2019 passed by the Civil Judge (Senior Division- II), Seraikella appointing Mr. Vijay Kumar Srivastava, retired In-charge Chief Engineer, Rural Works Department, Government of Jharkhand as an Arbitrator, who has ultimately passed the award on 30.12.2021. The petitioners are, however, at liberty to challenge the said award under Section 34 of the Act, 1996 and raise all the points available to them under the said provision.
36. The writ petition is dismissed with the aforesaid observations and liberty.
37. I.A. Nos.7216 of 2021 and I.A. No.508 of 2022 are also dismissed.
(Rajesh Shankar, J.) Sanjay/AFR