State arbitration law upheld for legislative competence, but struck down where it nullified awards made rule of court.

A State law on arbitration was treated as falling within the Concurrent List under the doctrine of pith and substance, and Presidential assent under Article 254(2) protected its operation in Kerala. The Court also held that the UNCITRAL Model Law resolution was only recommendatory and did not attract Article 253. However, a law that cancels arbitration clauses and reopens awards already made rule of court impermissibly interferes with final judicial determinations. To that extent, the statute was found to trench upon judicial power and breach the separation of powers.

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Issues: (i) Whether the Kerala Revocation of Arbitration Clauses and Reopening of Awards Act, 1998 was within the legislative competence of the State Legislature and protected by Presidential assent under Article 254(2) of the Constitution of India; (ii) whether the State Act, by cancelling arbitration clauses and reopening awards and judgments, encroached upon the judicial power of the State and violated the doctrine of separation of powers.

Issue (i): Whether the Kerala Revocation of Arbitration Clauses and Reopening of Awards Act, 1998 was within the legislative competence of the State Legislature and protected by Presidential assent under Article 254(2) of the Constitution of India.

Analysis: The subject-matter of the State Act was held to be arbitration, which falls within Entry 13 of List III of the Seventh Schedule. Applying the doctrine of pith and substance, the Act was found to be referable to the Concurrent List and not to Union List Entries 12, 13, 14 or 37. The Court further held that, once the State Act had been reserved for and had received Presidential assent, its operation in Kerala was protected by Article 254(2). The Resolution of the United Nations General Assembly on the UNCITRAL Model Law was treated as recommendatory and not as a binding international obligation attracting Article 253.

Conclusion: The State Act was within the legislative competence of the State Legislature and was not invalid on the ground that it was enacted under Article 253 or outside the State's legislative field.

Issue (ii): Whether the State Act, by cancelling arbitration clauses and reopening awards and judgments, encroached upon the judicial power of the State and violated the doctrine of separation of powers.

Analysis: The Court held that the scheme of the Arbitration Act, 1940 required judicial application of mind before awards could be modified, remitted, set aside, or made rule of court. A judgment and decree passed for making an award a rule of court was held to be an exercise of judicial power, not a mere ministerial act. Since the State Act targeted awards already made rule of court and sought to nullify their legal effect, it was found to interfere with final judicial determinations and to trench upon the judicial function. The Court also held that the earlier contrary view was per incuriam and sub silentio on the point of judicial power.

Conclusion: The State Act was unconstitutional to the extent that it encroached upon the judicial power of the State and violated the doctrine of separation of powers.

Final Conclusion: The State Act survived the challenge on legislative competence but failed on the constitutional limitation arising from interference with judicial power, so the appeals did not succeed in restoring the validity of the impugned legislation.

Ratio Decidendi: A State law on arbitration, even if within the Concurrent List and protected by Presidential assent under Article 254(2), cannot validly nullify final judicial determinations or awards that have attained the status of rule of court, because such a law transgresses the separation of powers by encroaching upon judicial power.

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