2005 (5) TMI 651 - SC - Indian Laws

Supreme Court clarifies Arbitration Act application pre-1996, allows challenge to arbitration award

The Supreme Court held that the National Consumer Disputes Redressal Commission lacks jurisdiction to refer disputes to arbitration. It determined that ... - Issues Involved:1. Jurisdiction of the National Consumer Disputes Redressal Commission to refer disputes to arbitration.2. Applicability of the Arbitration Act, 1940 vs. the Arbitration and Conciliation Act, 1996.3. Enforcement and challenge of the arbitration award.4. Principle of res judicata in the context of arbitration proceedings.Detailed Analysis:1. Jurisdiction of the National Consumer Disputes Redressal Commission to Refer Disputes to Arbitration:The Supreme Court examined whether the National Consumer Disputes Redressal Commission (NCDRC) had the jurisdiction to refer a dispute to arbitration, even with the consent of the parties. The Court referenced its earlier decision in Skypak Couriers Ltd. Vs. Tata Chemicals Ltd. [(2000) 5 SCC 294], which held that the NCDRC does not have the jurisdiction to refer matters to arbitration. Consequently, the Supreme Court allowed the appeal and set aside the judgment under challenge, stating, 'In view of the said decision, this appeal deserves to be allowed.'2. Applicability of the Arbitration Act, 1940 vs. the Arbitration and Conciliation Act, 1996:The primary contention was whether the arbitral proceedings initiated before the enforcement of the 1996 Act should be governed by the 1940 Act. The Court noted that the reference to arbitration was made on 19.5.1995, before the 1996 Act came into force. According to Section 21 of the 1996 Act, 'the arbitral proceedings in respect of a particular dispute commence on the date on which a request for that dispute to be referred to arbitration is received by the respondent.' The Court concluded that the 1940 Act would apply, stating, 'We, therefore, are clearly of the opinion that the provisions contained in the 1940 Act would govern the proceedings arising out of the award and not the 1996 Act.'3. Enforcement and Challenge of the Arbitration Award:The Supreme Court addressed the enforcement of the arbitration award and the right to challenge it. The Court emphasized that it did not have the jurisdiction to direct the enforcement of the award under the 1996 Act, which was not applicable. The Court stated, 'This Court merely directed the parties to enforce the said award which would mean that the same should be enforced in accordance with law.' The Court also clarified that the appellants retained the right to challenge the award under the 1940 Act, despite the High Court's previous dismissal of their objections.4. Principle of Res Judicata in the Context of Arbitration Proceedings:The Court considered whether the principle of res judicata barred the appellants from challenging the award. It was noted that the issue of the applicability of the 1940 Act versus the 1996 Act had not been previously adjudicated by the Supreme Court or the Division Bench of the High Court. The Court held that the principle of res judicata did not apply in this context, particularly since the earlier declaration was contrary to existing law. The Court cited its decision in Shakuntla Devi Vs. Kamla & Ors. [2005 (4) SCALE 21], which recognized exceptions to the principle of res judicata.Conclusion:The appeal was allowed, and the matter was remitted to the High Court for reconsideration of the appellants' objections under Sections 30 and 33 of the 1940 Act. The Supreme Court directed that the objections be considered on their own merit by a bench with the requisite determination. The Court concluded, 'For the reasons aforementioned, this appeal succeeds which is allowed and the matter is remitted to the High Court for considering the Appellants' objections under Sections 30 and 33 of the 1940 Act by a bench having requisite determination there over on its own merit.' The parties were directed to bear their own costs.