Andhra HC (Pre-Telangana)
Rashtriya Ispat Nigam Limited, ... vs Kaveri Engineering Industries Ltd. And ... on 16 November, 2001
Equivalent citations: 2002(3)ALT51
Author: S.B. Sinha
Bench: S.B. Sinha
JUDGMENT S.B. Sinha, C.J.
1. Interpretation of Section 31(4) of the Arbitration Act, 1940 falls for consideration in this petition, which has been referred to a Division Bench by a learned single Judge of this Court.
2. The facts leading to the filing of the petition read thus: The petitioner is a public limited company incorporated under the Companies Act, 1956. It invited tenders for supply and erection of plant, machinery and equipment for the purpose of LPG installation at Visakhapatnam on 4-9-1985. The 1st respondent submitted quotation for the same on 25-10-1985 for storage of LPG in spheres, but subsequently revised quotation was given for storage of LPG in bullets. The 1st respondent was awarded with contract for erection, testing and commissioning of LPG installation on 22-9-1987 and work was initially awarded to the 1st respondent at the value of Rs. 1,99,00,000/- which was increased to Rs. 2,05,20,000/- by purchase order dated 29-4-1988. As per the terms of the contract, time is the essence of the contract. In case of default, the petitioner is entitled to collect liquidated damages at 2% of the contract value per month or part thereof but not exceeding 5% of the value,
3. According to the petitioner, there was delay in execution of the work contract, which is attributable to the respondent only. As per the terms of the contract any additional equipment and materials required for the work and proper completion of the work is to be treated as integral part of the work and cannot be treated as extra work. The petitioner advanced monies to the extent of Rs. 75,00,000/- and was always co-operative for the speedy execution of the work contract. The system was fully made ready only by 15-6-1989 and there was delay on the part of the 1st respondent in completing the work. The petitioner, therefore, imposed liquidated damages at 5% for the total contract price and a sum of Rs. 12,98,680/-was deducted and the same was informed to the respondent by letter dated 11-7-1990.
4. It appears that disputes arose as regards the appointment of arbitrator in the matter and pursuant to an order of this Court in W.P.No. 11012 of 1993 dated 24-12-1994, one Sri N. Krishnamurthy, a retired Judicial member of the Income Tax Appellate Tribunal, Madras was appointed as arbitrator in place of one Sri A. Ramachandrao to resolve the dispute between the parties and the arbitrator entered reference on 15-2-1995. The 1st respondent filed his claim statement before the Arbitrator on 28-2-1995 making seven claims to the total value of Rs. 1,40,51,479/-together with interest at 15% from 1-2-1995 till date of the award and further interest ill the date of payment. An award was passed on 24-4-1996 accepting five claims and interest was awarded at 12% per annum on all amounts awarded from 23-7-1992 till date of award and from the date of award to the date of decree or realisation whichever is earlier. The petitioner on 27-4-1996 received copy of the award. It is alleged that the arbitrator misconducted the proceedings by ignoring the conditions of the agreement and he had not considered the points raised in the rebuttal statement. The arbitrator has not taken into account the various delays committed by the 1st respondent. The petitioner has also referred to various irregularities alleged to have been committed by the arbitrator while passing the award. Therefore, the petitioner filed the present petition under Sections 30 and 33 of the Act, 1940 for setting aside the award dated 24-4-1996 passed by respondent No. 2.
5. While things stood thus, with effect from 25-1-1996 the new Arbitration Act viz., Arbitration and Conciliation Act, 1996 (Act No. 26 of 1996) came into force. The award was filed in this Court on 22-5-1996. In W.P.M.P.No. 34085 of 1996 filed by the 1st respondent, a learned single Judge of this Court directed that the award be transmitted to the Court of I Additional Senior Civil Judge, Visakhapatnam to proceed further with the execution of the award. Thereafter, the petitioner filed a review application contending that in view of Section 85 of the Arbitration and Conciliation Act, 1996, an award passed by an arbitrator appointed prior to the commencement of the said Act would still be governed by the provisions of the Arbitration Act, 1940 and the question of such an award being executed as a decree of the Court under Section 36 of Act, 1996 does not arise. It was brought to the notice of the learned Judge about the filing of the present petition under Section 30 of the Act before this Court. By order-dated 20-2-1997, the learned single Judge dismissed the review application. It was observed:
Of course, in view of the provisions of Section 85 of the new Act, the award will be governed only by the provisions of the Act and hence it has to be filed in the Court which appointed the Arbitrator. The Arbitrator has actually filed it only in this Court thereby complying with the provisions of the old Act. Thereafter, inasmuch as the award has to be executed by the Visakhapatnam Sub Judge, I had ordered it to be transmitted to that Court, I do not see any infirmity in that direction because this Court has the power to transmit the award to that Court having jurisdiction for the purpose of execution particularly when at that time no objections have been filed by either party to the award. The fact that the petitioner has filed objections subsequently will not, in my opinion, make any difference.
The question that remains is whether the objections also should be heard only by this Court keeping the execution of the award in abeyance or whether the said objection petition also can be transmitted to the learned Subordinate Judge, Visakhapatnam for consideration and disposal in accordance with law. This is a matter, which the learned Judge hearing the O.P. has to be considered and decide. The pendency of such objection petition, in my opinion, is not a relevant factor to review my order.
6. Pursuant to the order of this Court, the award has been transmitted to the I Additional Senior Civil Judge's Court, Visakhapatnam.
7. When the matter came up for hearing before the learned single Judge, a preliminary objection was raised by the 1st respondent that the matter cannot be gone into in the absence of the original award being with this Court. On the other hand, relying on the decision of the Apex Court in State of M.P. v. S and S Ltd . it was contended on behalf of the petitioner that the High Court being a Court of Record has the necessary power to correct the order dated 20-2-1997 as the Court which appointed the arbitrator has only jurisdiction either to set aside the award or to make it the rule of the Court. The order dated 20-2-1997 has become final. Being faced with the said situation, the learned single Judge referred the matter to a Division Bench.
8. The learned Counsel appearing for the petitioner would submit that as this Court appointed an arbitrator, objection to the award filed by him in terms of Section 30 of the Arbitration Act, 1940 would be maintainable in this Court alone. Reliance in this connection has been placed on State of M.P. v. S and Ltd.. Drawing our attention to the provisions of Sub-section (4) of Section 31 of the said Act, learned Counsel would contend that this Court alone has jurisdiction to entertain the said objection.
9. The present petition for setting aside the award was filed before this Court on 8-8-1996. It is not in dispute that pursuant to or in furtherance of the order dated 27-12-1996, the award filed in this Court had been transmitted to the I Additional Senior Civil Judge, Visakhapatnam to proceed further with the execution. As noticed hereinbefore, the review application filed against the said order was dismissed on 20-2-1997 and the order has become final.
10. It is in the aforementioned situation, the learned single Judge was of the opinion that having regard to the decorum of the institution and the judicial discipline, declaration as regards the correct legal position be made by a Division Bench having regard to the fact that the order dated 20-2-1997 has attained finality.
11. In the aforementioned backdrop, the decision of the Apex Court in State of A.P. v. S and S Ltd. (1 supra) may be noticed. In that case, disputes and differences having arisen between the parties, arbitrators were nominated by both the parties. The arbitrator appointed on behalf of the State having been resigned, the appellant nominated another arbitrator therein. The said arbitrators appointed an umpire. As the arbitrators disagreed in their views, the dispute was referred to the umpire. However, the appointment of the original arbitrator appointed on behalf of the appellant as also the arbitrator appointed in his place was challenged. Subsequently, the appointment of the umpire was also questioned. The Court of the Additional District Judge, Mandsaur held that the appointment of the original arbitrator and consequently the umpire was bad in law. In revision thereagainst, the High Court appointed one Sri R.C. Soni as the sole arbitrator under Section 12(2) of the Act. Accordingly the order of the Additional District Judge was modified. Against the said order, S.L.P. was filed before the Supreme Court. By consent of the parties, the appointment of the sole arbitrator was set aside and in his place one Sri V.S., Desai senior advocate was appointed as an arbitrator. The order reads thus:
"Special Leave is granted. The appeal is allowed. The appointment of Shri R.G. Soni as the sole arbitrator is set aside by consent of the parties.
Mr. V.S. Desai, Senior Advocate, is appointed Arbitrator by consent of the parties to go into all the questions in this matter and make his award. The remuneration for the arbitrator would be Rs. 5,000.00, which will be shared by both the parties equally. The arbitrator will make his award within three months from to-day. The parties will be at liberty to mention for extension of time for making the award.
12. The award was filed by the arbitrator before the Apex Court. An objection was raised on the ground that the said award ought to have been filed in the Court of the Additional District Judge, Mandsaur as that is the Court which would have the jurisdiction to entertain the suit regarding the subject matter in issue. The said contention was negatived by the Apex Court. It was held:
According to Mr. Shroff the Award should have been filed, not in this Court, but in the Court of the Additional District Judge, Mandsaur, as that is the Court which will have jurisdiction to entertain the suit regarding the subject-matter of the reference. We are not inclined to accept this contention of Mr. Shroof. It should be noted that the opening words of Section 2 are "In this Act, unless there is anything repugnant in the subject or context". Therefore the expression "Court" will have to be understood as defined in Section 2(c) of the Act, only if there is nothing repugnant in the subject or context. It is in that light that the expression "Court" occurring in Section 14(2) of the Act will have to be understood and interpreted. It was this Court that appointed Shri V.S. Desai, on 29-01-1971, by consent of parties as an arbitrator and to make his Award. It will be seen that no further directions were given in the said order which will indicate that this Court had not divested itself of its jurisdiction to deal with the Award or matters arising out of the Award. In fact the indications are to the contrary. The direction in the order, dt. 29-01-1971, is that the arbitrator is "to make his Award". Surely the law contemplates further steps to be taken after the Award has been made, and quite naturally the forum for taking the further action is only this Court. There was also direction to the effect that the parties are at liberty to apply for extension of time for making the Award. In the absence of any other Court having been invested with such jurisdiction by the order, the only conclusion that is possible is that such a request must be made only to the Court which passed that order, namely, this Court.
13. The Apex Court noticed that it had retained control over the arbitration proceedings and from time to time the time for making the award was granted and other directions had also been passed in the said proceedings.
14. In the aforementioned situation and having regard to the provisions contained in Section 14(2) of the Act, it was held that the arbitration award could be validly filed before the Apex Court.
15. To the same effect is the decision of the Apex Court in Guru Nanak Foundation v. Rattan Singh wherein dealing with Section 31(4) it was held:
Then comes Section (4). It opened with a non obstante clause and is comprehensive in character. The non-obstante clause excludes anything anywhere contained in the whole Act or in any other law for the time being in force if it is contrary to or inconsistent with the substantive provision contained in Section (4). To that extent it carve" out an exception to the general question of jurisdiction of the Court in which Award may be filed elsewhere provided in the Act in respect of the proceedings referred to in Section (4). The provision contained in Section (4) will have an overriding effect in relation to the filing of the Award if the conditions therein prescribed are satisfied, if those conditions are satisfied the Court other than the one envisaged in Section 14(2) or Section 31(1) will be the Court in which Award will have to be filed. That is the effect of the non obstante clause in Sections (4) of Section 31. Sub-section (4) thus invests exclusive jurisdiction in the Court, to which an application has been made in any reference and which that Court is competent to entertain as the Court having, jurisdiction over the arbitration proceedings and all subsequent applications arising out of reference and the arbitration proceedings shall have to be made in that Court and in no other Court. Thus Section (4) not only confers exclusive jurisdiction on the Court to which an application is made in any reference but simultaneously ousts the jurisdiction of any other Court which may as well have jurisdiction in this behalf.
16. In our view, aforesaid decisions have no application to the facts of the present case. In the instant case, the arbitrator was appointed in a writ proceeding. A Writ Court is not a Civil Court within the meaning of the provisions of the Arbitration Act. There is also nothing to show that this Court has retained with it the overall control over the arbitration proceedings. The award has already been transmitted to the Court of I Additional Senior Civil Judge, Visakhapatnam.
17. In GM, SC Railway, Secunderabad v. Sri Rama Engineering Constructions it was held:
The decision of the apex Court in Guru Nanak Foundation (2 supra) was under the old Act. Section 31(4) of 1940 Act in the said decision was construed holding that where arbitrator has been appointed by the Supreme Court, it would have jurisdiction to entertain the award and it could not be filed before the High Court. Having regard to the fact that the arbitrator is now appointed by the Chief Justice or by the person or body nominated by him in an administrative capacity and not in a judicial capacity, the said decision cannot be said to have any application whatsoever.
18. In Viyayalakshmamma v. B.T. Shankar , the Apex Court while considering the provisions of Hindu Adoptions and Maintenance Act, 1956 vis-a-vis the Old Hindu Law, clearly held that Courts may not add to or alter provisions of statutes by reading into them what was never intended by the Legislature or may have been deliberately avoided by it. The Apex Court further observed that the extent to which aspects of law would require modernization, modification and alteration are matters of legislative policy and courts may not add to or alter the language, structure or contents of a provision by reading into it that which was not intended by the Legislature.
19. At this stage, we may also notice the decision of this Bench in N.V. Chowdary v. Hindustan Steel Works Construction Ltd. wherein it was held:
The Arbitration Act does not provide for the mode and manner in which a decree is to be executed for an obvious reason that the provisions of the Code of Civil Procedure shall apply in relation to such a decree. Section 37, in our opinion, is absolutely clear and unambiguous.
The decisions of the apex Court in Surjet Singh Atwal , M/s. Guru Nanak Foundation and State of M.P. whereupon Mr. G. Krishna Murthy has relied cannot be said to have any application whatsoever. It is one thing to say that it is in terms of Sub-section (4) of Section 31 of the Act, all applications under that Act shall be filed before that court which had appointed the arbitrator. But the same does not mean that an application for execution shall also be filed for enforcing a decree passed in terms of a judgment making the award a rule of court also before the said court inasmuch as execution of a decree must be made in terms of the provisions of the Code and not under the provisions of the Arbitration Act. Section 31(4) will thus have no application whatsoever. It is now well settled that when a legal fiction is created the same must be given its full effect. (See East End Dwellings Co. v. Finsbury B.C. 1951 (2) All ER 587).
20. Having regard to the aforesaid decision of this court, we are of the opinion that it is a fit case where the objection petition filed under Section 30 of the Arbitration Act should also be determined by the Court of I Additional Senior Civil Judge, Visakhapatnam particularly when the order dated 20-2-1997 has become final. The Registry is accordingly directed to transmit the present petition to the Court of I Additional Senior Civil Judge, Visakhapatnam for determination in accordance with law. The O.P. is disposed of accordingly.