Bombay High Court
Konkan Railway Corporation Ltd. vs Isco Track Sleepers Pvt. Ltd., The Chief ... on 3 March, 2003
Equivalent citations: 2003(3)ARBLR558(BOM), 2003(6)BOMCR290, 2003(4)MHLJ776, [2004]55SCL549(BOM)
Author: C.K. Thakker
Bench: C.K. Thakker, D.Y. Chandrachud
JUDGMENT C.K. Thakker, C.J.
1. In all these petitions, constitutional validity and vires of Sub-sections (5) and (6) of Section 16 and Clause (a) of Sub-section (2) of Section 37 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as "the Act") have been challenged.
2. We have heard the learned counsel for the parties.
3. The learned counsel for the petitioners contended that the above provisions are ultra vires, and unconstitutional being violative of Article 14 of the Constitution, as they are arbitrary and discriminatory.
4. Section 16 is under Chapter IV. The said Chapter deals with Jurisdiction of Arbitral Tribunals. The section provides for competence of Arbitral Tribunal to decide its jurisdiction. Sub-section (1) enacts that the Arbitral Tribunal may rule on its own jurisdiction, including ruling on any objections with respect to the existence or validity of arbitration agreement. Sub-sections (2), (3) and (4) of Section 16 provide for raising of plea as to jurisdiction of Arbitral Tribunal.
5. Sub-sections (5) and (6) deal with arbitral award, and they read as under:-
"(5) The arbitral tribunal shall decide on a plea referred to in Sub-section (2) or Sub-section (3) and, where the arbitral tribunal takes a decision rejecting the plea, continue with the arbitral proceedings and make an arbitral award.
(6) A party aggrieved by such an arbitral award may make an application for setting aside such an arbitral award in accordance with Section 34."
6. Chapter IX of the Act provides for 'Appeals'. Section 37 enlists "Appealable orders". Sub-section (2) allows appeals against certain orders. Clause (a) of Sub-section (2) reads thus:
"37. ...
(1) ...
(2) An appeal shall also lie to a court from an order of the arbitral tribunal--
(a) accepting the plea referred to in Sub-section (2) or Sub-section (3) of Section 16;
or
(b) ..."
Sub-section (3) declares that no second appeal shall lie from an order passed in appeal.
7. The learned counsel for the petitioners contended that the above provisions make discrimination between persons similarly situated. Whereas against certain orders, appeals have been provided by the Legislature, in case of other orders, appeals have not been provide.d Said provisions are, therefore, arbitrary, discriminatory and violative of Article 14 of the Constitution.
8. We see no substance in the argument of the learned counsel for the petitioners. So far as the validity of Section 16 of the Act is concerned, the point is no longer res integra and is concluded by a decision of the Supreme Court in Babar Ali v. Union of India and Ors. , . Against a decision upholding the validity of the above provision by the High Court of Delhi, Special Leave petition was field by the aggrieved petitioner. The Supreme Court, while dismissing Special Leave Petition, observed that the High Court had rightly held that judicial review was available to the aggrieved party by challenging the award in accordance with the procedure laid down in the Act. Merely because the question of jurisdiction can be raised after the award is made, and not at any penultimate stage, is no ground for holding that such an order is not subject to 'judicial scrutiny'. The Court proceeded to observe that the time and manner of judicial scrutiny can legitimately be laid down by an Act of Parliament. The challenge of vires, therefore, was rightly negatived by the High Court. The Special Leave Petition was accordingly dismissed.
9. The leaned counsel for the petitioners contended that the above order passed by the Apex Court cannot be said to be law laid down by the Supreme Court under Article 141 of the constitution. It was also urged that the doctrine of merger would not apply to such orders passed in Special Leave Petitions nor the order passed by the High Court could be said to have been affirmed or confirmed by the Supreme Court. It was, therefore, urged that it is open to the petitioners to challenge constitutional validity of the above provision.
10. In our opinion, the contention is not well-founded. Reliance on Kunhayammed and Ors. v. State of Kerala and Anr. , , instead of supporting the petitioners, helps the respondents. In the said case, the Supreme Court considered the doctrine of merger in the light of Article 136 in juxtaposition of Article 141 of the Constitution. Relying on several earlier decisions, it was held that when Special Leave Petition is not granted, and the proceeding in not registered as appeal, the doctrine of merger may not apply. At the same time, however, the Court expressly observed that if a Special Leave Petition is dismissed by the Supreme Court, and the order dismissing SLP is a speaking order recording reasons in support of such order, it cannot be contended that those reasons would not bind the High Court, and Article 141 would not get attracted. The Court also quoted with approval similar observations in Supreme Court Employees' Welfare Association v. Union of India, . It is, therefore, clear that the reason weighed with the Supreme Court while disposing Special Leave Petition are relevant and having a binding effect.
11. No doubt, the counsel contended that in Babar Ali, no reasons have been recorded by the Supreme court, and hence, Article 141 of the Constitution would not be attracted. We are afraid, we cannot uphold the contention. The Supreme Court, in terms, observed that an order passed by an Arbitrator regarding jurisdiction is subject to judicial scrutiny. The only thing is that the said right would not be available to the aggrieved party at penultimate stage; and a challenge can be made only after the final award is made by the Arbitrator. We have, therefore, no hesitation in holding that the point is concluded by the Apex Court in Babar Ali.
12. Even otherwise, looking to the scheme of the Act, it is clear that the Legislature thought it fit to grant right of appeal in certain cases by reserving right in the authority to decide about its own jurisdiction. Such a provision, in our judgment, cannot be held ultra vires. As observed by the Supreme Court in Chaube Jagdish Prasad and Anr. v. Ganga Prasad Chaturvedi, , and by a Division Bench of this Court in BASF Styrenics Private Limited v. Offshore Industrial Construction Pvt. Ltd. and Anr. , , there are two classes of cases coming before an authority or Tribunal constituted under an Act of Parliament:
Firstly, where the Legislature entrusts a Tribunal with a jurisdiction, including jurisdiction to determine whether the preliminary state of facts on which exercise of its jurisdiction depends exists; and secondly, where the Legislature confers jurisdiction on such Tribunals to proceed in a case where a certain state of facts exists or is shown to exist. The difference between the two lies in that whereas in the former case, the Tribunal has power to determine the facts giving it jurisdiction, in the latter case, it has only to see whether a certain state of facts exists.
13. Keeping in view the phraseology used in Section 16 of the Act, it cannot be gainsaid that the Arbitral Tribunal has been granted jurisdiction to determine whether the preliminary state of facts on which its exercise of jurisdiction depends exists, and it has power to proceed in accordance with law. if no appeal is provided against such an order, it cannot be said that the provision is ultra vires or unconstitutional.
14. We are also not impressed by an argument that in cases where it has been held by the Arbitral Tribunal that it has no jurisdiction, an appeal is provided, and thus, there is discrimination. The two classes of aggrieved persons cannot be said to be on par with each other. As to the persons who are aggrieved by the order passed by the Arbitral Tribunal that it has no jurisdiction, the proceedings would come to an end. Thereafter it is not open to the Arbitral Tribunal to proceed with the case any more. The matter would be over. Obviously, therefore, the Legislature thought it proper to grant a right of appeal. Regarding other cases, however, the judicial scrutiny of the jurisdiction of the Arbitral Tribunal as well as the merits of the matter is merely delayed till the conclusion of the proceedings. After the final award, it is open to the aggrieved party to raise all contentions, including an objection as to jurisdiction of the Arbitral Tribunal. Hence, it cannot be successfully contended that the persons similarly situated had been shown different treatment and Section 37(2)(a) of the Act should be held discriminatory and violative of Article 14 of the Constitution.
15. Since we see no substance in any of the contentions raised on behalf of the petitioners, we dismiss the petitions, however, with no order as to costs.