Gujarat High Court
Bharuch Agricultural Produce Market ... vs Stup Engineers on 9 April, 2018
Author: Rajesh H.Shukla
Bench: Rajesh H.Shukla
C/SCA/15400/2006 JUDGMENT
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 15400 of 2006
With
R/SPECIAL CIVIL APPLICATION NO. 15401 of 2006
With
R/SPECIAL CIVIL APPLICATION NO. 15402 of 2006
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR.JUSTICE RAJESH H.SHUKLA Sd/-
==========================================================
1 Whether Reporters of Local Papers may be allowed to
see the judgment ? No
2 To be referred to the Reporter or not ?
No
3 Whether their Lordships wish to see the fair copy of the
judgment ? No
4 Whether this case involves a substantial question of law
as to the interpretation of the Constitution of India or any
No
order made thereunder ?
==========================================================
BHARUCH AGRICULTURAL PRODUCE MARKET COMMITTEE
Versus
STUP ENGINEERS
==========================================================
Appearance:
MR VC VAGHELA(1720) for the PETITIONER(s) No. 1
MR HK PARMAR(1220) for the RESPONDENT(s) No. 1
MR. ALPESH H PARMAR(3747) for the RESPONDENT(s) No. 1
==========================================================
CORAM: HONOURABLE MR.JUSTICE RAJESH H.SHUKLA
Date : 09/04/2018
ORAL JUDGMENT
1. Present petitions are filed by the Bharuch Agricultural Produce Market Committee under Article 226 of the Constitution of India as well as under the provisions of Arbitration & Conciliation Act, 1996 (hereinafter referred to Page 1 of 15 C/SCA/15400/2006 JUDGMENT as 'the Arbitration Act'), for the prayer as prayed inter alia that appropriate writ, order or direction may be issued declaring that there does not exist between the parties any arbitration agreement and consequently quashing and setting aside the decision of the arbitrator holding that clause 37 of the tender form issued in pursuance to the advertisement amounts to arbitration agreement between the parties and also prayed for interim relief on the ground stated in the memo of petition.
2. The facts of the case briefly summarized are as follows:
2.1 The petitioner is incorporated under the Agricultural Produce Market Act, 1963 and is carrying on the business and trade in respect of the cotton seeds and other items. It is having sub-yard at Palej. The Government of India under its technology Mission of Cotton, provided for assistance to the extent of 70% with maximum limit of Rs.90 lacs for creating modern facilities and infrastructure. Therefore, under the advise of the Gujarat State Agricultural Marketing Board, the petitioner decided to avail the benefit and entered into a contract with Shri J. P. Savaliya to carry out the work of providing more facilities at Palej sub-yard. Thereafter, the respondent Shri J. P. Savaliya, the Engineer & Architect, invited tenders as stated in detail and the work was Page 2 of 15 C/SCA/15400/2006 JUDGMENT commenced. However, the Director, Agricultural Produce Market Committee, by his communication dated 16.03.2002, required the APMC to stop all works carried out by the said architect and his name was removed from the panel of of Architects by the Board. Therefore, in compliance with such direction, the necessary steps were taken to stop the work and the Civil Suit has been instituted in the Civil Court at Bharuch against the contractors. Therefore, Shri J. P. Savaliya approached under the Arbitration Act, before the Honourable the Chief Justice, High Court of Gujarat and the order came to be passed by the High Court (Coram: Ms. R. M. Doshit, J.) dated 30.09.2004 referring the dispute to the sole arbitrator Shri R. J. Shah of Ami Engineers, which has led to the present petitions raising the very issue with regard to the appointment of the arbitrator and the arbitration clause on the ground stated in the memo of petitions.
3. Heard learned advocate Shri V. C. Vaghela for the petitioner and learned advocate Shri H. K. Parmar for the respondent.
4. Learned advocate Shri Vaghela referred to the papers and pointedly referred to the arbitration petition produced at Annexure-J and submitted that the reference is made to the Page 3 of 15 C/SCA/15400/2006 JUDGMENT Clause 37 of the contract and provisions of the Arbitration Act. He has referred to the provisions of Agricultural Produce Market Act, 1973, Sammati Kararnama produced on record and also Annexure-C, which is MOU/agreement between Gujarat State Agricultural Marketing Board, Agricultural Produce Market Committee, Bharuch-Palej and Technology Mission on Cotton for improvement of Bharuch-Palej market yard under Mini Mission III of TMC.
5. Learned advocate Shri Vaghela referred to clause 11, 12 and 13 of the Sammati Kararnama, which empowers the Committee to terminate the agreement and/or to stop the work. It further provides for removal of the architect or the cancellation of the appointment of the architect and contractors and it is also accepted that the remuneration shall not be claimed in such cases. He has also referred to MOU/agreement between Gujarat State Agricultural Marketing Board, Agricultural Produce Market Committee, and Technology Mission on Cotton and emphasized that the clause 21 to 24 are relevant that the Board or the Committee to carry out the programme and the implementation of the aforesaid mission has been approved on cost sharing basis.
6. Learned advocate Shri Vaghela has stated that the Page 4 of 15 C/SCA/15400/2006 JUDGMENT programme or the project has to be implemented as a part of mission through such agencies and the Board will carry out the project. He, therefore, submitted that the petitioner has to work on instructions of the Board and therefore, cannot avoid the decision taken by the Board as the project or the contract with such construction facilities is undertaken by the Board as a part of the project or the mission. He referred to Section 4 of the Gujarat Agricultural Produce Market Act, 1963 and submitted that the Director is empowered to supervise such programme and/or functioning of the Marketing Committee shall be subject to the supervision and control of Director.
7. Learned advocate Shri Vaghela also submitted that the respondents could have challenged the decision of the Director and/or the order of termination. However, the same has not been challenged and therefore, the petitioner Agricultural Produce Market Committee having no say in the matter. He submitted that no direction could be sought against the Agricultural Produce Market Committee as it is required to work as per the decision taken by the Board.
Similarly, he referred to Section 19 of the Act. He referred to the background and submitted that Shri Savaliya was removed as an architect from the panel of the architect pursuant to the complaint about irregularity. Page 5 of 15
C/SCA/15400/2006 JUDGMENT
8. Learned advocate Shri Vaghela submitted that the project could not be completed and the design etc., was not proper and he could not make the correction in spite of the request made to him. Therefore, the decision was taken by the Board to stop the project and as the work of Palej regarding the petitioner Agricultural Produce Market Committee is under the same project, the petitioner Agricultural Produce Market Committee has no say in the matter. He, therefore, submitted that such a decision of the Board to terminate the service and to stop the work is only required to be implemented by the petitioner-Committee following the decision taken by the Board. He, therefore, submitted that the petition is maintainable and the arbitration proceedings are without any jurisdiction as there is no such clause providing for the arbitration and there is no agreement between the petitioner and respondent as the respondent was engaged by the Board as a part of the project and it could have challenged the decision of the Board and therefore, cannot claim any relief qua the petitioner.
9. Per contra, learned advocate Shri H. K. Parmar referred to the papers and submitted that, it is the agreement between the Committee and the other third party where the Page 6 of 15 C/SCA/15400/2006 JUDGMENT respondent has no concerned. He referred to Section 11 of the Arbitration Act. He has also submitted that if the petitioner decides to challenge the appointment, it could have taken appropriate measures as the petitioner could have preferred an appeal before the Hon'ble Apex Court. In support of the contentions, he referred to and relied upon a judgment reported in AIR 2006 SC 450 and emphasized the observation made in paragraph 44 and 45. He emphasized the observation with regard to the scope of exercise of discretion under Article 226 and 227 in arbitration proceedings. He has also submitted that the petitions under Article 226 are not maintainable and the appointment is made as per the arbitration clause, normally the High Court would decline to exercise the discretion relying upon the judgment of the High Court reported in 2005 (4) GLR 3174. Learned advocate Shri Parmar, therefore, submitted that the appointment and the proceedings initiated under the Arbitration Act cannot be challenged in the petition under Article 226 when the mechanism has been provided in the Arbitration Act itself. He, therefore, submitted that the present petition may not be entertained.
10. In view of this rival submissions, it is required to be considered whether the present petition deserves Page 7 of 15 C/SCA/15400/2006 JUDGMENT consideration. The issue has been raised with regard to the scope of interference in the arbitration proceedings with much emphasis about the tender papers as well as the MOU or the agreement between Gujarat State Agricultural Marketing Board, Agricultural Produce Market Committee, Bharuch-Palej and Technology Mission on Cotton referring to Arbitration Petition No.58/2003 between petitioner- Agricultural Market Produce Committee, Bharuch and the agreement with the respondent. Moreover, a close look at the MOU/agreement between Gujarat State Agricultural Marketing Board, Agricultural Produce Market Committee, Bharuch-Palej and Technology Mission on Cotton, market yard under Mini Mission III of TMC. It is an agreement of memorundum of understanding between Government of India through Technology Mission on Cotton and Gujarat State Agricultural Marketing Board and the Agricultural Produce Market Committee, Bharuch-Palej. The Sammati Kararnama produced at Annexure-B is between the Agricultural Produce Market Committee and Shri Savaliya. Thus, though the project is sought to be implemented by the Government of India, Technology Mission on Cotton and the Gujarat State Agricultural Marketing Board, is an agency for the purpose of implementation of such project and/or to carry out the project, Page 8 of 15 C/SCA/15400/2006 JUDGMENT there is an understanding between the Government of India and such Gujarat State Agricultural Marketing Board or the Agricultural Produce Market Committee, Bharuch-Palej. Whereas the arbitration proceedings in the form of Arbitration No.58/2003 is between the Agricultural Produce Market Committee, Bharuch-Palej, petitioner herein and the contractor. These two are separate and independent agreement or the understanding. Therefore, the submissions, which have been made by learned advocate Shri Vaghela referring to the provisions of Gujarat Agricultural Produce Marketing Act, 1963 and trying to emphasize that the project was to be implemented through the Board and the Agricultural Produce Market Committee, Bharuch, would not have any role, but had to follow the decision taken by the Board and therefore, the arbitration proceedings are without any agreement or without jurisdiction, is misconceived. The contentions has been sought to be raised with reference to the provisions of Agricultural Produce Market Committee that a mechanism or the internal arrangement for the implementation of the project or the mission. However, the Government of India has arrived at understanding with the State Agricultural Marketing Board, which is a separate understanding. Therefore, arbitration proceedings between Page 9 of 15 C/SCA/15400/2006 JUDGMENT the petitioner and the contractor would stand on a different footing.
11. It is in these circumstances, the issue with regard to the interference with the arbitration proceedings and/or issuance of writ of mandamus or any writ declaring that there does not exist any agreement between the parties is misconceived. The arbitration agreement interpreting and deciding the clause 37 of the agreement or the tender form is required to be considered with reference to the provisions of the Arbitration Act and also the scope of exercise of discretion under Article 226 and 227, once the arbitration proceedings has been commenced and/or pending the issue has been considered. The Hon'ble Apex Court in a judgment reported in 2005 (8) SCC 618 has made following observation while referring to the provisions of the Arbitration Act:
"The language employed in Section 5 of the Arbitration Act which start with non-obstante clause has reference to "judicial authority" and it has been provided that "no judicial authority shall intervene except where so provided in this Part."
Therefore, the scope of intervention in the pending proceedings in exercise of discretion under Articles 226 and 227 is required to be considered. The Hon'ble Apex Court in Page 10 of 15 C/SCA/15400/2006 JUDGMENT aforesaid judgment reported in AIR 2006 SC 450 in case of M/s. S.B.P. & Co. V/s. M/s. Patel Engineering Ltd. & Anr., has made the observation in paragraphs 44 and 45 "44. It is seen that some High Courts have proceeded on the basis that any order passed by an arbitral tribunal during arbitration, would be capable of being challenged under Article 226 or 227 of the Constitution of India. We see no warrant for such an approach. Section 37 makes certain orders of the arbitral tribunal appealable. Under Section 34, the aggrieved party has an avenue for ventilating his grievances against the award including any in-between orders that might have been passed by the arbitral tribunal acting under Section 16 of the Act. The party aggrieved by any order of the arbitral tribunal, unless has a right of appeal under Section 37 of the Act, has to wait until the award is passed by the Tribunal. This appears to be the scheme of the Act. The arbitral tribunal is after all, the creature of a contract between the parties, the arbitration agreement, even though if the occasion arises, the Chief Justice may constitute it based on the contract between the parties. But that would not alter the status of the arbitral tribunal. It will still be a forum chosen by the parties by agreement. We, therefore, disapprove of the stand adopted by some of the High Courts that any order passed by the arbitral tribunal is capable of being corrected by the High Court under Article 226 or 227 of the Constitution of India. Such an intervention by the High Courts is not permissible.
45. The object of minimizing judicial intervention while the matter is in the process of being arbitrated upon, will Page 11 of 15 C/SCA/15400/2006 JUDGMENT certainly be defeated if the High Court could be approached under Article 227 of the Constitution of India or under Article 226 of the Constitution of India against every order made by the arbitral tribunal. Therefore, it is necessary to indicate that once the arbitration has commenced in the arbitral tribunal, parties have to wait until the award is pronounced unless, of course, a right of appeal is available to them under Section 37 of the Act even at an earlier stage."
12. However, at the same time, the Hon'ble Apex Court in a judgment reported in (2003) 6 SCC 675 has made the observations with regard to the scope of jurisdiction of High Court under Articles 226 and 227. It has been observed that:
"The Constitution Bench in L. Chandra Kumar Vs. Union of India dealt with the nature of power of judicial review conferred by Article 226 of the Constitution and the power of superintendence conferred by Article 227. It was held that the jurisdiction conferred on the Supreme Court under Article 32 of the Constitution and on the High Courts under Articles 226 and 227 of the Constitution is part of the basic structure of the Constitution, forming its integral and essential feature, which cannot be tampered with much less taken away even by constitutional amendment, not to speak of a parliamentary legislation.A recent Division Bench decision by Delhi High Court (Dalveer Bhandari and H.R. Malhotra, JJ) in Criminal Writ Petition NO.s.758, 917 and 1295 of 2002 - Govind Vs. State (Govt. of NCT of Delhi) decided on April 7, 2003 (reported as [2003] 6 ILD 468 makes an indepth survey of decided cases including almost all the leading decisions by this Court and holds - Page 12 of 15
C/SCA/15400/2006 JUDGMENT "The power of the High Court under Article 226 cannot be whittled down, nullified, curtailed, abrogated, diluted or taken either by judicial pronouncement or by the legislative enactment or even by the amendment of the Constitution.
The power of judicial review is an inherent part of the basic structure and it cannot be abrogated without affecting the basic structure of the Constitution." The essence of constitutional and legal principles, relevant to the issue at hand, has been correctly summed up by the Division Bench of the High Court and we record our approval of the same." Therefore, in light of the aforesaid judgments and discussion made hereinabove, without any further elaboration, it would be indicative of the fact that it is expressing a word 'caution' though there may not be any inherent lack of jurisdiction under Articles 226 and 227.
12.1 Therefore, even if it is accepted that the scope of exercise of discretion under Articles 226 and 227 of the Constitution by the High Court exercising the jurisdiction under the constitution may not be on the same footing as referred to as judicial authority for the purpose of Section 5 of the Arbitration Act, the judgment of the Hon'ble Apex Court reported in AIR 2006 SC 450 has expressed the word 'caution'. The Hon'ble Apex Court in this judgment has reflected the ethos to the underlying object of the Arbitration Act for speedy disposal of the proceedings and has laid down Page 13 of 15 C/SCA/15400/2006 JUDGMENT the guideline for self-imposed restriction. Therefore, the observations have been made that course open to the party is right to file appeal is provided under the Arbitration Act. The same view has been reiterated in a subsequent judgment of the Hon'ble Apex Court reported in (2014) 7 SCC 255 in case of Lalitkumar (Dead) through LRS Neeta Lalit kumar Sanghvi & Anr.V/s. Dharamdas V. Sanghavi & Ors. This Court has also taken the view with regard to the scope of jurisdiction under Article 227 to intervene at the interim stage of proceedings before the Arbitral Tribunal in a judgment reported in 2016 (4) GLR 3181
13. Therefore, in light of the aforesaid discussion referring to the judgment of the Hon'ble Apex Court, and also the judgment of this Court reported in 2016 (4) GLR 3181 and the judgment of the Coordinate Bench reported in 2005 (4) GLR 3174, the issue does not require any further elaboration that even if it is not inherent lack of jurisdiction as a guideline for exercise of discretion under Article 227, normally the High Court would decline to exercise such discretion.
14. It is in these circumstances and in light of the observations made by the Hon'ble Apex Court as referred to hereinabove, even if there is any issue to be raised by the Page 14 of 15 C/SCA/15400/2006 JUDGMENT petitioner with regard to the jurisdiction or the clause regarding arbitration, the same could be raised before the same authority i.e. the sole arbitrator, which could be considered and the decision taken therein could be subject to further scrutiny in an appeal filed under Section 37 of the Arbitration Act.
15. Therefore, the present petitions cannot be entertained and deserve to be dismissed and accordingly, stand dismissed.
Sd/-
(RAJESH H.SHUKLA, J) Further order After the order was pronounced, learned advocate Shri V. C. Vaghela for the petitioner has requested for stay of the operation of the judgment and order to enable his client to pursue the remedy before the higher forum.
In the circumstances, the request is denied.
Sd/-
(RAJESH H.SHUKLA, J) ABHISHEK Page 15 of 15