TaxTMI 
TaxTMI 
2017 (12) TMI 780
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....respondent had filed a suit in the High Court of Bombay seeking an interim injunction restraining the State from encashing the bank guarantee. As the time for making the award and the period of extension had expired, the proceeding for arbitration was abandoned. The State filed a money suit before the learned Sub-Judge I, Saraikella for realization of certain sum with interest. The respondent after appearing in the suit filed an application under Section 34 of the Arbitration Act, 1940 (for short, "the Act") for stay of the suit. The said prayer was contested and the learned Sub-Judge allowed the application filed by the respondent. However, regard being had to the quantum of the claim, the Sub-Judge expressed the view that it was desirable that the parties should settle their disputes in an arbitration proceeding. Against the said order, an appeal was preferred under Section 39 of the Act before the High Court which dismissed the appeal vide order dated 06.08.2002. 3. Being aggrieved, the State of Jharkhand preferred the appeal which was disposed of by this Court vide order dated 10.01.2013. It is worthy to mention here that the learned counsel appearing for the parties agreed ....
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.... will lose its right of appeal. It was also contended that by referring the matter to arbitration this Court had not really retained control of the proceedings of the arbitrator. To bolster the said submissions, heavy reliance was placed on State of Rajasthan v. Nav Bharat Construction Company (2) (2010) 2 SCC 182. 7. The Court noted the decision in Nav Bharat Construction Company (supra) which had followed the judgment in Mcdermott International INC. v. Burn Standard Co. Ltd. and others (2005) 10 SCC 353 and further apprised itself of the principles enunciated in Bharat Coking Coal Limited (supra) which has held that right to appeal is a valuable right and unless there exists cogent reasons, a litigant should not be deprived of the same. The Division Bench referred to the principle enunciated in Associated Contractors (supra) wherein the three-Judge Bench had opined that this Court cannot be considered to be a Court within the meaning of Section 2(i)(e) of the Arbitration and Conciliation Act, 1996 (for brevity, 'the 1996 Act'). The referral judgment noted the view taken in State of Madhya Pradesh v. Saith and Skelton (P) Ltd. (1972)1 SCC 702 and Guru Nanak Foundation v. Rat....
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....d Guru Nanak Foundation (supra) are open to doubt and on dealing with the decisions in entirety, it would be clear that it has laid down the principle that the term 'Court' cannot include the Supreme Court. 11. Mr. Viswanathan, learned senior counsel appearing for the respondent, in his turn, contends that Section 2(c) of the Act defines Court and the definition when read in an apposite manner shows that the word "Court" can be assigned a different meaning depending on the context. For the said purpose, he has commended us to the authorities in Commissioner of Gift Tax, Madras v. N.S. Getty Chettiar (1971) 2 SCC 741, Commissioner of Sales Tax, State of Gujarat v. Union Medical Agency (1981) 1 SCC 51, Saith & Skelton (supra) and Whirlpool Corporation v. Registrar of Trade Marks, Mumbai and others (1998) 8 SCC 1. It is urged by the learned senior counsel for the respondent that Section 14(2) of the Act indicates that there may be a case where the Court itself can direct the award to be filed in the court and once the superior court has retained control and passed a specific direction to file an award in terms of Section 14(2) before the Court, then all other courts cease to have j....
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....d by him that the decisions which have been referred to in Associated Contractors (supra) are factually different and when the factual backdrop differs, the Court has to look at the ratio in the context of the case. He has also urged that the authorities relied on by the learned counsel for the appellants are not relatable to the controversy at hand because in the said cases the court had not retained control of the proceedings with it. 13. To appreciate the controversy, it is crucial to appreciate the scheme of the Act. Section 2 is the dictionary clause. It commences with the words "unless there is anything repugnant in the subject or context". The contention before us is that the use of such words clearly evinces that the term "Court" can be assigned a different meaning depending on the context. In Union Medical Agency (supra), a three-Judge Bench, while dealing with the concept of statutory interpretation when the subject matter or context is different, has held:- "14. It is a well-settled principle that when a word or phrase has been defined in the interpretation clause, prima facie that definition governs whenever that word or phrase is used in the body of the ....
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....urt extended the time for making the Award by four months and further permitted the arbitrator to hold the arbitration proceedings at Bombay. The nature of the order passed on January 29, 1971, and the subsequent proceedings, referred to above, clearly show that this Court retained full control over the arbitration proceedings." 16. Thereafter, the three-Judge Bench referred to the decision in Ct. A. Ct. Nachiappa Chettiar and others v. Ct. A. Ct. Subramaniam Chettiar (1960) 2 SCR 209 : AIR 1960 SC 307 and placing reliance on the same, expressed the view that this Court is the "Court" under Section 14(2) of the Act where the arbitration award could be validly filed. 17. In Guru Nanak Foundation (supra) case, since differences arose between the parties, an application was filed before the High Court under Section 20 of the Act which appointed retired Chief Engineer as the sole arbitrator to whom the reference was made. When the reference was pending, an application was moved before the Delhi High Court for removal of the arbitrator and the High Court thought it appropriate to reject the application. Guru Nanak Foundation assailed the soundness of the order passed by the High C....
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....d with Section 31(4) of the Act. It was contended before the High Court that as the reference was made to the arbitrator by the Supreme Court and further directions were given, this Court was in seisin of the matter and it alone had the jurisdiction to entertain the award in view of the provisions of Section 31(4) of the Act. The matter came to be challenged before this Court and the proceedings before the High Court were stayed. 19. The two-Judge Bench, after narrating the facts, posed the following question:- "The narrow question in this case therefore is: in view of the circumstances herein delineated, which is the court which would have jurisdiction to entertain the Award; in other words which is the court having jurisdiction in which the Award should be filed by the arbitrator?" 20. Analysing the meaning of the expression "Court" as engrafted under Section 2(c) and keeping in view the words occurring in the beginning of Section 2, the Court stated thus:- "13. The dictionary meaning of expression "court" in Section 2(c) has to be applied wherever that word occurs in the Act, but with this limitation that if there is anything repugnant in the subject or c....
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.... clause in sub-section (4) of Section 31, it has been opined that Sub-section (4) invests exclusive jurisdiction in the court, to which an application has been made in any reference and 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. Therefore, sub-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. Illustrating further, the Court held that if an Award was required to be filed under Section 14(2) read with Section 31(1) in any particular court as being the court in which a suit touching the subject-matter of Award would have been required to be filed, but if any application in the reference under the Act has been filed in some other court which was competent to entertain that application, then to the exclusion of the first mentioned court the latter court alone, in view of the overriding effect of the provision....
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....rt, that court would have the jurisdiction to entertain such an application. Explaining Kumbha Mawji's case, the two-Judge Bench stated that in the said case a contention was raised before this Court that Section 31(4) is merely confined to applications during the course of pendency of a reference to arbitration and this Court after analysing the scheme of Section 31, held that there is no conceivable reason why the legislature should have intended to confine the operation of sub-section (4) only to applications made during the pendency of an arbitration, if as is contended, the phrase "in any reference" is to be taken as meaning "in the course of a reference". Ultimately this Court held that the phrase "in any reference" used in sub-section (4) of Section 31 means "in the course of any reference", and concluded that Section 31, sub-section (4) would vest exclusive jurisdiction in the court in which an application for the filing of an Award has been first made under Section 14 of the Act. After so stating, the learned Judges proceeded to observe:- "22. ... We fail to see how this decision would help in answering the contention canvassed on behalf of the appellant. In fact the de....
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....ainly negative an opportunity to appeal because this is the final court. The two-Judge Bench further opined that conceding as held by this Court in Garikapati Veeraya (supra) that the right of appeal is a vested right and such a right to enter the superior court accrues to the litigant and exists as on and from the date the lis commences, right is not denied or defeated because the highest court to which one can come by way of appeal will entertain all contentions that may have to be canvassed on behalf of the appellant. Thereafter it has been stated:- "23. ... The door of this Court is not being closed to the appellant. In fact the door is being held wide ajar for him to raise all contentions which one can raise in a proceeding in an originating summons. Therefore, we see no merit in this contention and it must be rejected." 26. We have extracted the aforesaid passage to highlight how the principle laid down in Kumbha Mawji has been distinguished in the case of Guru Nanak Foundation (supra). To appreciate the reasoning, it is necessary to analyse the facts and the principles stated in Kumbha Mawji (supra). In the said case, the Court stated that the three questions ....
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.... that under Section 31(1) of the Act an award may be filed in any court having jurisdiction in the matter to which the reference relates and in the said case, reference arose out of a contract which was entered into at Calcutta and had to be performed in Assam and, therefore, Gauhati Court as well as Calcutta Court admittedly had jurisdiction over the subject matter of the reference. It took note of the submission raised by the Union of India that an application to Gauhati Court was made earlier than the application preferred to Calcutta High Court and, therefore, the Calcutta High Court had no jurisdiction. Learned single Judge was of the opinion that Section 31(4) related only to applications made during the pendency of a reference to arbitration and not to applications made subsequent to the making of an award. According to the learned single Judge, irrespective of applications for filing an award, the exclusive jurisdiction was determined with reference to the question as to which was the competent court in which the award was, in fact, first filed under sub-section (2) of Section 14, (as distinct from when the application for the filing of the award was first presented). In th....
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....ion, and to bring about by the combined operation of these three provisions the avoidance of conflict and scramble is equally essential whether the question arises during the pendency of the arbitration or after the arbitration is completed or before the arbitration is commenced. There is no conceivable reason why the legislature should have intended to confine the operation of sub-section (4) only to applications made during the pendency of an arbitration, if as is contended, the phrase "in any reference" is to be taken as meaning "in the course of a reference"." [Underlining is ours] 29. Further analyzing the scheme of the Act and various categories of arbitration, the Court held:- "13. ... Indeed, having regard to the wide language employed in these sub-sections it has been assumed that sub-sections (2) and (3) cover all three classes in all their stages. If so, is there any sufficient reason to think that sub-section (4) was meant to have a very restricted operation? On the view of this sub-section suggested for the appellant, not only would an application made after the award was pronounced be excluded from sub-section (4) but also an application made before the....
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....4) of the Act. Placing reliance on Kumbha Mawji, the Court held:- "5. ... There are different sections in the Arbitration Act whereby an application is to be made even before any reference has been made. Section 8 for instance, provides for an application to invoke the power of the Court, when the parties fail to concur in the appointment of an arbitrator to whom the reference can be made. So also Section 20 provides for an application to file the arbitration agreement in court so that an order of reference to an arbitrator can be made. These are clearly applications anterior to the reference but they lead to a reference. Such applications are undoubtedly applications "in the matter of a reference" and may fall within the purview of Section 31(4) of the Act even though these applications are made before any reference has taken place. But an application under Section 34 is clearly not an application belonging to the same category. It has nothing to do with any reference. It is only intended to make an arbitration agreement effective and prevent a party from going to Court contrary to his own agreement that the dispute is to be adjudicated by a private tribunal." An....
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....We have earlier referred to Saith and Skelton (supra). Mr. Viswanathan, learned senior counsel, has drawn inspiration from Nav Bharat Construction Company (supra) and Burn Standard Co. Ltd. (supra). In Burn Standard Co. Ltd., the three-Judge Bench referred to the order passed by this Court wherein directions were issued that the arbitrator shall file the award in this Court and any application which may become necessary to be filed during or after the conclusion of the arbitration proceedings shall be filed only in this Court and, accordingly, it directed that the objection petition under Section 34 could have been filed only in this Court. This order was passed in the context of Section 34 of the 1996 Act. As we notice from the said order, no independent reasons have been ascribed but the order has been passed solely on the basis of an earlier order. 33. At this juncture, we think it apt to immediately refer to the recent decision in Associated Contractors (supra). The three-Judge Bench was dealing with the meaning of "Court" under Section 2(1)(e) of the 1996 Act. Answering the reference, the three-Judge Bench referred to Section 2(1)(e) and Section 42 of the 1996 Act and in....
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....r the reason that, under Section 2(1)(e), the competent court is fixed as the Principal Civil Court exercising original jurisdiction or a High Court exercising original civil jurisdiction, and no other court. For all these reasons, we hold that the decisions under the 1940 Act would not obtain under the 1996 Act, and the Supreme Court cannot be "court" for the purposes of Section 42. 21. One other question that may arise is as to whether Section 42 applies after the arbitral proceedings come to an end. It has already been held by us that the expression "with respect to an arbitration agreement" are words of wide import and would take in all applications made before during or after the arbitral proceedings are over. In an earlier judgment, Kumbha Mawji v. Dominion of India, the question which arose before the Supreme Court was whether the expression used in Section 31(4) of the 1940 Act "in any reference" would include matters that are after the arbitral proceedings are over and have culminated in an award. It was held that the words "in any reference" cannot be taken to mean "in the course of a reference", but mean "in the matter of a reference" and that such phrase is wid....
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....s 30 and 33 of the Act. 36. We may immediately make it clear that in Nav Bharat Construction Company (supra), the matter related to reference under Section 20 of the Act. 37. Presently, we may proceed to analyze the reasoning given by the three-Judge Bench in Saith and Skelton (supra). The Court in the said case expressed the view that the directions contained in the order passed by the Court and the further proceedings indicated the retention of full control by this Court over the arbitration proceeding. Placing reliance on CT. A. CT. Nachiappa Chettiar (supra), the Court held thus:- "21. In Ct. A. Ct. Nachiappa Chettiar v. Ct. A. Ct. Subramaniam Chettiar the question arose whether the trial court had jurisdiction to refer the subject-matter of a suit to an arbitrator when the decree passed in the suit was pending appeal before the High Court. Based upon Section 21, it was urged before this Court that the reference made by the trial court, when the appeal was pending, and the award made in consequence of such reference, were both invalid as the trial court was not competent to make the order of reference. This Court rejected the said contention and after a reference....
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....s bad and the arbitrators were guilty of misconduct. That apart, many other grounds were also raised. The said objections were traversed by the other side and a prayer was made to pass decree in terms of the award. The trial Judge rejected the stand of the objector with regard to the alleged misconduct of the arbitrators and further found that there was no substance in the contention that the reference was a result of undue influence or coercion. The trial Judge, however, held that reference to the arbitrators which included matters in dispute in the suit comprised questions of title in relation to immoveable properties in Burma and so it was without jurisdiction and invalid. On appeal being preferred, the High Court allowed the appeal of the respondent (respondent before this Court) and confirmed the findings of the trial court in respect of the pleas raised by the appellants before the High Court as to the misconduct of the arbitrators and invalidity of the reference on the ground that it was the result of coercion and undue influence. It further reversed the conclusions of the trial court that the reference and the award were invalid inasmuch as they related to immovable prop....
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....generally, as prescribed by Section 107 of the Code of Civil Procedure the appellate court has all the powers of the trial court and can perform as nearly as may be the same duties as are conferred and imposed on the trial court. If that be so, during the pendency of the appeal, can it not be said that matters in difference between the parties in suit continue to be matters in dispute in appeal? The decision of the appeal can materially affect the nature and effect of the decree under appeal; and there is no doubt that all the points raised for the decision of the appellate court can be and often are points in difference between them in the suit; and, in that sense, despite the decision of the trial court the same points of difference in suit continue between the parties before the appellate court. If during the pendency of such an appeal parties interested agree that any matter in difference between them in the appeal should be referred to arbitration the first two conditions of the section are satisfied. When Section 21 was enacted did Legislature intend that during the pendency of the appeal no reference should be made even if the parties satisfied the first two conditions presc....
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....rs of difference can be referred to as are not covered by an interlocutory judgment of the court. We would accordingly hold that it is open to the trial court to refer to arbitration any matters of difference between the parties to the suit provided they agree and apply at any time before the court pronounces its final judgment in the suit." 42. We may also note with profit that the Court addressed to another complication as the appeals were pending before the High Court at the material time. The issue that arose was which is the court that had jurisdiction in such a case to make the order of reference. The Court opined that there is no difficulty in holding that if the suit is pending in the trial court and a final judgment has not been pronounced by it, it is the trial court which is competent to make the order of reference. Similarly, if a suit has been decided, a final judgment has been delivered and a decree has been drawn up by the trial court and no appeal has been preferred against it, the matter is concluded and there is no scope for applying Section 21 at all. Proceeding further, the Court stated that if a decree determining the suit has been drawn up by the trial cour....
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....he present case proceedings subsequent to the preliminary decree were pending before the trial court and so we must hold that the trial court was competent to act under Section 21. On that view the objection against the validity of the reference based on the provisions of Section 21 cannot succeed." 43. The aforesaid analysis of the Court has to be appositely appreciated. It seems to us, the facts in the said case were quite different and the principle that the Court has laid down lucidly states that the appellate court includes the court of first instance and the power of reference under Section 21 of the Act can still be exercised by the appellate court under certain circumstances. We do not have any difference with the proposition that has been laid down in the said decision. The analogy of the said decision has been applied to understand the expression "Court" occurring in Section 14(2) of the Act. True, in Saith and Skelton (supra), the learned Judges have qualified the same by stating the context in which it occurs. Bestowing our thoughtful consideration, we are disposed to think that the analogy taken from CT. A. CT. Nachiappa Chettiar (supra) and applying to ....
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....rt" as defined in Section 2(c) will have to be adhered to unless there is anything repugnant in the subject or context in which it is used. Therefore, the expression "court" as used in Section 14(2) will have to be understood in this background." The aforesaid reasoning, does not really lay the foundation for establishing the proposition that if a superior court keeps control over the arbitral proceeding the award can only be filed before the said Court. 45. At this juncture, we may refer to the definition of the word 'Court' in Section 2(c) of the Act. It reads as follows:- "Section 2(c) 'Court' means a Civil Court having jurisdiction to decide the question forming the subject-matter of the reference if the same had been the subject matter of a suit, but does not, except for the purpose of arbitration proceedings under Section 21, include a Small Cause Court." 46. Section 14 deals with the award to be signed and filed by the Arbitrator. Section 14(2) refers to the word "Court". Sub-section (2) reads as follows:- "(2) The arbitrators or umpire shall, at the request of any party to the arbitration agreement or any person claiming under such party or ....
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.... vesting in one court the authority to deal with all questions regarding the validity, effect or existence of an award or an arbitration agreement, (2) by casting on the persons concerned the obligation to file all applications regarding the conduct of arbitration proceedings or otherwise arising out of such proceedings in one court, and (3) by vesting exclusive jurisdiction in the court in which the first application relating to the matter is filed. The further analysis of the Court is that the context of sub-section (4) would seem to indicate that the sub-section was not meant to be confined to applications made during the pendency of an arbitration. The necessity for clothing a single court with effective and exclusive jurisdiction, and to bring about by the combined operation of the three provisions the avoidance of conflict and scramble is equally essential whether the question arises during the pendency of the arbitration or after the arbitration is completed or before the arbitration is commenced. There is no conceivable reason that the legislature has intended to confine the operation of sub-section (4) only to applications made during the pendency of arbitration because....
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....jurisdiction of the Supreme Court as envisaged under Article 131 of the Constitution and analyzing the language employed under Article 262, has held that the authority conferred under Article 32 has its limitations when the lis under Article 262 emerges. The Constitution has not provided machinery for resolution of the disputes in the Constitution but has empowered Parliament to make laws to provide to exclude the power of the Supreme Court or any other court with regard to jurisdiction in respect of complaints or disputes that find mention in Article 262(1). Thereafter, the Court referred to the authorities in State of Orissa v. Government of India and another (2009) 5 SCC 492 and Networking of Rivers, In re (2012) 4 SCC 51. In Networking of Rivers, in re (supra), the Court ruled that Section 11 of the Inter-State River Water Disputes Act, 1956 (for short, "the 1956 Act") uses the expression "use, distribution and control of water in any river" and they are the keywords in determination of the scope of power conferred on a tribunal constituted under Section 3 of the 1956 Act. If a matter fell outside the scope of these three crucial words, the power of Section 11 of the 1956 Act i....
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.... right and unless there exist cogent reasons, a litigant should not be deprived of the same. It is a statutory right." 53. It is worthy to mention that in the said case, the two-Judge Bench had distinguished Guru Nanak Foundation on facts. But the emphasis has been on the sustenance of the right of a party to prefer an appeal. In this context, Mr. Sinha has drawn our attention to the Constitution Bench decision in Garikapati Veeraya (supra) that lays down that the legal pursuit of a remedy, suit, appeal and second appeal are really but steps in a series of proceedings all connected by an intrinsic unity and are to be regarded as one legal proceeding and the right of appeal is not a mere matter of procedure but is a substantive right. It has been further held that the right of appeal is a vested right and such a right to enter the superior court accrues to the litigant and exists as on and from the date the lis commences and although it may be actually exercised when the adverse judgment is pronounced such right is to be governed by the law prevailing at the date of the institution of the suit or proceeding and not by the law that prevails at the date of its decision or at the da....
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....graph 91 of the said judgment, in the concurring opinion, it has been stated thus:- "91. It is the settled position in law that jurisdiction of courts comes solely from the law of the land and cannot be exercised otherwise. So far as the position in this country is concerned conferment of jurisdiction is possible either by the provisions of the Constitution or by specific laws enacted by the legislature. For instance, Article 129 confers all the powers of a court of record on the Supreme Court including the power to punish for contempt of itself. Articles 131, 132, 133, 134, 135, 137, 138 and 139 confer different jurisdictions on the Supreme Court while Articles 225, 226, 227, 228 and 230 deal with conferment of jurisdiction on the High Courts. Instances of conferment of jurisdiction by specific law are very common. The laws of procedure both criminal and civil confer jurisdiction on different courts. Special jurisdiction is conferred by special statute. It is thus clear that jurisdiction can be exercised only when provided lower either in the Constitution or in the laws made by the legislature. Jurisdiction is thus the authority or power of the court to ....
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.... expected in law to assume jurisdiction on the foundation that it is a higher court and further opining that all contentions are open. The legislature, in its wisdom, has provided an appeal under Section 39 of the Act. Solely because a superior court appoints the arbitrator or issues directions or has retained some control over the arbitrator by requiring him to file the award in this Court, it cannot be regarded as a court of first instance as that would go contrary to the definition of the term 'court' as used in the dictionary clause as well as in Section 31(4). Simply put, the principle is not acceptable because this Court cannot curtail the right of a litigant to prefer an appeal by stating that the doors are open to this Court and to consider it as if it is an original court. Original jurisdiction in this Court has to be vested in law. Unless it is so vested and the Court assumes, the court really scuttles the forum that has been provided by the legislature to a litigant. That apart, as we see, the said principle is also contrary to what has been stated in Kumbha Mawji. It is worthy to note that this Court may make a reference to an arbitrator on consent but to hold it as ....