TaxTMI 
TaxTMI 
2022 (6) TMI 97
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....dv., Mr. Kuriakose Varghese, Adv., Mr. V. Shyamohan, AOR, Mr. Surya Prakash, Adv., Mr. Akshat Gogna, Adv., Ms. Astu Khandelwal, Adv., Mr. Siddharth, AOR, Mr. Mohammed Sadique T.A., AOR, Mr. Anu K. Joy, Adv., Mr. Alim Anvar, Adv., Mr. Abraham C. Mathews, Adv., Mr. Merry S. Mathew, Adv., Mr. Hitesh Kumar, Adv., Mr. Akhileshwar Jha, Adv., Mr. K.M. Kavitha, Adv., Mr. Sanand Ramakrishnan, AOR, Mr. John Mathew, AOR, Mr. Aljo K. Joseph,Adv., Ms. Shelna K., Adv., Mr. Ritesh Kumar Chowdhary, AOR, Mr. Rabin Majumder, AOR, Mr. Roy Abraham Adv, Mr. Himinder Lal, AOR, Mr. Prashanto Chandra Sen, Sr. Adv., M/S.KMNP Law, AOR. JUDGMENT B.R. GAVAI, J. 1. Two important questions of law, with regard to the legislative competence of the Kerala State Legislature to enact the Kerala Revocation of Arbitration Clauses and Reopening of Awards Act, 1998 (hereinafter referred to as the "State Act") and as to whether the State Act encroaches upon the judicial power of the State, are involved in the present appeals. * BACKGROUND: 2. The High Court of Kerala at Ernakulam, by the impugned judgment dated 9th July 2013 delivered in O.P. No.4206 of 1998 and companion matters, has held the State Act....
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.... "Kerala Revocation of Arbitration Clauses and Reopening of Awards Act, 1998 Preamble .............. ........... Section 1 ­ Short title, extent, commencement and application (1) This Act may be called the Kerala Revocation ofArbitration Clauses and Reopening of Awards Act, 1998. (2) It extends to the whole of the State of Kerala. (3) It shall be deemed to have come into force on the14th day of November, 1997. (4) It shall apply to all agreements executed in termsof the local competitive bidding specification. Section 2 ­ Definitions (1) In this Act, unless the context otherwiserequires, (a) "agreement" means an agreementexecuted in terms of the local competitive bidding specification for various works of the Government of Kerala; (b) "local competitive bidding specification" means the local competitive bidding specification adopted by the Government in their Order G.O. (Ms) No. 3/81/I&R dated the 20th January, 1981. (2) Words and expressions used but not defined inthis Act and defined in (a) the Arbitration Act, 1940 (Central Act10 of 1940); or ....
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....Act 10 of 1940) or in the Arbitration and Conciliation Act, 1996 (Central Act 26 of 1996) or in the Limitation Act, 1963 (Central Act 36 of 1963) or in any other law for the time being in force or in any judgement, decree or order of any court or other authority or in any agreement or other instrument, where it appears to the Government that any award passed is not in accordance with the terms of the agreement or there was failure to produce relevant data or other particulars before the Arbitrator before passing the award or the award passed is of unconscionable amounts, they may file appeal against such award within ninety days of the date of commencement of this Act. Section 6 ­ Procedure before court For the removal of doubts, it is hereby clarified that the provisions of the Code of Civil Procedure, 1908 (Central Act 5 of 1908), shall apply to all proceedings before court and to all appeals under this Act. Section 7 ­ Arbitration Act not to apply The provisions of this Act shall apply to any proceedings instituted under this Act notwithstanding anything inconsistent herein with the provisions of the Arbitration Act, 1940 (Central Act ....
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....to as "1963 Act"), in relation to such suits whichever is later. This is notwithstanding anything contained in the 1940 Act or in the 1996 Act or in the 1963 Act. 7. Section 5 of the State Act enables the State Government to file an appeal against any award within a period of 90 days from the date of commencement of the State Act, where it appears to the State Government that any award passed is not in accordance with the terms of the agreement or there was failure to produce relevant data or other particulars before the Arbitrator before passing the award or the award passed is of unconscionable amounts. Again, this is notwithstanding anything contained in the 1940 Act or in the 1996 Act or in the 1963 Act or in any other law for the time being in force or in any judgment, decree or order of any court or other authority or in any agreement or other instrument. 8. Section 6 of the State Act clarifies that the provisions of the Code of Civil Procedure, 1908 (hereinafter referred to as "CPC") shall apply to all proceedings before the court and to all appeals under the State Act. 9. Section 7 of the State Act provides that the provisions of the State Act shall apply to ....
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....hip with foreign countries, United Nations Organization, participation in international conferences, associations and other bodies and implementing of decisions made thereat, entering into treaties and agreements and implementing of treaties, agreements and conventions, the issue of applicability of Article 253 of the Constitution of India would arise. As such, the Union Parliament had an overriding legislative power to make any law for the whole or any part of the territory of India. Once a Central Legislation referable to Article 253 of the Constitution of India comes into being, then the State Act cannot be said to be valid only in view of the Presidential assent received under Article 254 (2) of the Constitution of India; (iii) That the executive power of the Union is coextensive with the legislative power of the Parliament under Article 73(1)(b) of the Constitution of India. As such, the 1996 Act is enacted by the Central Legislation in order to give effect to the executive power of the Government of India, to give effect to the decisions taken at the international conference. As such, if it is held that the Presidential assent under Article 25....
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....ior Counsel submitted that the impugned judgment of the High Court of Kerala suffers on various grounds. Shri Gupta further submitted that the High Court of Kerala committed a basic error in holding that the 1996 Act is universally applicable. He submitted that the 1996 Act would be applicable only when there is an agreement between the parties, whereby they have agreed to refer their dispute to arbitration. It is therefore submitted that what has been done by the State Act is a cancellation of contract by a statute and as such, the State Act or a part thereof would be referable to Entry 7 of List III of the Seventh Schedule to the Constitution of India. 16. Shri Gupta submitted that the rest of the legislation deals with the consequences of cancellation of the Arbitration clause in the Agreement. It is submitted that on cancellation of an agreement, sub­section (2) of Section 3 of the State Act provides an opportunity to any party to the agreement to file a suit in a competent civil court. He submitted that Section 4 of the State Act extends the period of limitation for filing of the suit. Section 5 of the State Act enables the Stat....
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....Act, in view of Article 254 (2) of the Constitution of India. 20. Shri Gupta submitted that the State Act does not relate to any Entry in List I of the Seventh Schedule to the Constitution of India. He submitted that the approach of the High Court of Kerala has been totally erroneous. It is submitted that since all the three Lists of the Seventh Schedule to the Constitution of India contain a number of entries, some overlapping is bound to happen. In such a situation, the doctrine of pith and substance is required to be applied to determine as to which entry does a given piece of legislation relate to. He submitted that regard must be had to the enactment as a whole, to its main object and to the scope and effect of its provisions. He submitted that when a legislation is traceable, in pith and substance, to an entry with regard to which a State is competent to legislate, then incidental and superficial encroachments on the other entry will have to be disregarded. Reference in this respect is made to the judgments of this Court in the cases of Hoechst Pharmaceutical Ltd. and Others v. State of Bihar and Others [(1983) 4 SCC 45] and State of Wes....
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....a have the effect of restricting the power of the State Legislature, the said Article should be given the narrowest possible meaning in order to harmonize it with the Entries in Lists II and III of the Seventh Schedule to the Constitution of India. He submitted that this can be done by interpreting that only the legislations enacted to give effect to binding obligation are covered by the said Article. 25. Shri Gupta further submitted that the Model Law is a suggested pattern for law makers which only recommends the practices to be adopted in the international arbitration and not for the domestic arbitration and as such, it cannot be held that it has any binding obligation insofar as domestic arbitration is concerned. 26. Shri Shishodia, learned Senior Counsel submitted that in the earlier statutory scheme prior to the 1996 Act, the 1940 Act governed the domestic arbitration, whereas the 1937 Act and the 1961 Act governed international commercial arbitrations. He submitted that in the 1996 Act, the domestic arbitrations are governed by Part I, whereas Part II governs international commercial arbitrations with separate specific provisions for Geneva Convention Awards and ....
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....ons made thereat and entering into treaties and agreements with foreign countries and implementing of treaties, agreements and conventions with foreign countries. He submitted that the State has enacted a legislature which is related to these entries, which are exclusively within the domain of the Union Legislature. He further submitted that Entry 37 deals with foreign loans. He submitted that since the State Act attempts to deal with the loans taken from the World Bank, it will be an encroachment on the legislative field reserved for the Union Legislature. It is therefore submitted that the State Act is enacted by the State Legislature in respect of entries which are exclusively within the jurisdiction of the Central Legislation and as such, beyond the competence of the State Legislature. He submitted that the question of Presidential assent under Article 254 (2) of the Constitution of India would arise only when the legislation is in respect of items covered in List III, i.e., the Concurrent List. Since the State Act deals with the entries exclusively in List I, the Presidential assent would be of no consequence to save the State Act. 31. Shri Ven....
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....tate Act empowers the State to interfere with the awards. He submitted that this is not permissible in view of the law laid down by this Court in the case of B.B. Rajwanshi (supra). 35. Shri Venugopal would further submit that assuming, but without admitting that the State Act was not arbitrary when it was originally passed, but by passage of time, it has become arbitrary and unreasonable. He submitted that much earlier to the enactment of the State Act, not only the awards have become final but the amount awarded has already been paid to the claimants. As such, if the State Act is permitted to operate now, it will amount to arbitrariness and unreasonableness. He therefore submitted that the present appeals deserve to be dismissed. 36. Shri P.C. Sen, learned Senior Counsel appearing on behalf of some of the respondents submitted that the State Act has the effect of depriving the respondents' settled right of property under Article 300­A of the Constitution of India which has been acquired as per law. He submitted that the awards passed, create a right in the property and are enforceable when the same are made a decree of the court. In this regard, ....
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....d that Section 34 (2A) of the 1996 Act came into effect on 23rd October 2015, i.e., much after the enactment of the State Act. It is therefore submitted that assuming that the State Act was validly enacted, however upon introduction of Section 34 (2A) of the 1996 Act on 23rd October 2015, the State Act has been impliedly repealed. Reliance in this respect is placed on the judgments of this Court in the cases of Saverbhai Amaidas v. State of Bombay [1955] 1 SCR 799] and T. Barai v. Henry Ah Hoe and Another [(1983) 1 SCC 177]. 42. Smt. Padmanabhan, learned counsel appearing on behalf of some of the respondents submitted that the assent of the President of India under Article 254(2) of the Constitution of India is not a matter of idle formality. She submitted that unless the State satisfies that relevant material was placed before the President of India and he was made aware about the grounds on which the Presidential assent was sought, the Presidential assent would not save the State Act from being invalid. In this respect, she relies on the judgment of this Court in the case of Gram Panchayat of Village Jamalpur v. Malwinder Singh and Others [(1985) 3 SCC 661]. ....
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....ommercial disputes as defined under Section 2(c) of the 2015 Act. He submitted that the 2015 Act is a subsequent Central enactment and therefore, the State Act being an earlier Act enacted by the State Legislature and repugnant to the Central enactment, cannot exist. It is submitted that the enactment of the 2015 Act would amount to a pro tanto repeal of the State Act. Reliance in this respect is placed on the judgments of this Court in the cases of T. Barai (supra) and Mar Appraem Kuri Company Limited and Another (supra). 48. Shri Mathew further submitted that only when the proceedings went against the State, they illegally enacted the State Act in order to either deny payments or delay them by compelling the respondents to face or to undergo an altogether different remedy for the very same cause of action. In this regard, he relies on the judgments of this Court in the cases of State of Tamil Nadu and Others v. K. Shyam Sunder and Others [(2011) 8 SCC 737] and Deep Chand and Others v. State of Uttar Pradesh and Others [[1959] Supp (2) SCR 8]. 49. Shri Kuriakose Varghese, learned counsel appearing on behalf of some of the respondents submitted that apart from mak....
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....d to arbitrary and discriminatory nature of the State Act. He submitted that the correctness of the reasons stated by the State Legislature cannot be the subject matter of judicial review. Reliance in this respect is placed on the judgment of this Court in the case of K. Nagaraj and Others v. State of Andhra Pradesh and Another [(1985) 1 SCC 523] . 54. Shri Gupta submitted that Section 9 of the CPC provides for the plenary jurisdiction of the civil courts to decide disputes of civil nature unless excluded by law. He submitted that so long as the parties are governed by an arbitration agreement, the civil courts, though having jurisdiction to entertain civil suits in respect of disputes arising out of the contract between the parties, are required to refer the disputes, if any, to arbitration under Sections 8 and 11 of the 1996 Act and Sections 20 and 34 of the 1940 Act. However, once the arbitration agreement stands cancelled, all fetters would stand removed and the civil courts will have the jurisdiction to entertain the disputes. It is submitted that the argument with regard to the forum to which an appeal would lie, being not provided is without ....
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...., 14 and 37 of List I of the Seventh Schedule and Article 253 of the Constitution of India. We will also have to examine the scope of clause (2) of Article 254 of the Constitution of India. 58. It will be relevant to reproduce Entries 12, 13, 14 and 37 of List I of the Seventh Schedule to the Constitution of India as under: "Seventh Schedule (Article 246) List I - Union List ............. 12. United Nations Organization. 13. Participation in international conferences,associations and other bodies and implementing of decisions made thereat. 14. Entering into treaties and agreements withforeign countries and implementing of treaties, agreements and conventions with foreign countries. ........ 37. Foreign loans. .........." 59. It will also be apposite to refer to Entry 13 of List III of the Seventh Schedule to the Constitution of India, which reads thus: "Seventh Schedule (Article 246) List III - Concurrent List ............ 13. Civil procedure, including all matters included in the Code of Civil Procedure at the commencement of this Constitution, limitation and ....
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....e competence." 62. It could thus be seen that this Court has observed that the subject of arbitration finds place in Entry 13 of List III, i.e., the Concurrent List of the Seventh Schedule to the Constitution of India. It has been held that the legislation pertaining to the said entry could be made either by the Parliament or the State Legislature. It has been held that since the subject of arbitration is in the Concurrent List, the State can also make a law with regard to the same. The only requirement is that to validate such a law, it is necessary to reserve the same for consideration of the President of India and obtain his assent. When such an assent is obtained, the provisions of the State Law or Act so enacted would prevail in the State concerned, notwithstanding its repugnancy with an earlier Parliamentary enactment made on the subject. It is not in dispute that in the present case also, the State Act was reserved for consideration of the President of India and the assent of the President of India has been obtained. As such, the State Act so enacted would prevail in the State of Kerala. 63. It will further be pertinent to note that in the....
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....e State Act was in any way repugnant to the Central Acts. We have already pointed out from the decisions of the Federal Court and this Court that one of the important tests to find out as to whether or not there is repugnancy is to ascertain the intention of the legislature regarding the fact that the dominant legislature allowed the subordinate legislature to operate in the same field pari passu the State Act." 41. It is clear from the aforesaid observations that in the instant case the latter Act made by Parliament i.e. the AC Act, 1996 clearly showed an intention to the effect that the State law of arbitration i.e. the M.P. Act should operate in the State of Madhya Pradesh in respect of certain specified types of arbitrations which are under the M.P. Act, 1983. This is clear from Sections 2(4) and 2(5) of the AC Act, 1996. Therefore, there is no substance in the argument of repugnancy and is accordingly rejected." 64. Since Gyan Sudha Mishra, J. disagreed with A.K. Ganguly, J. in the said case, the matter was referred to a larger Bench. 65. The Bench consisting of three learned Judges in the case of MP Rural 2018, agreed with the view expressed by Ganguly, J. 6....
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.... and rendering that repugnancy inconsequential upon procurement of Presidential assent. In this case, the State legislature duly passed the 2019 Act (State law) on a subject of the concurrent list in the presence of a law made by the Parliament (2013 Act) and obtained the assent of the President to the same on 02.12.2019 after duly placing the State law before the President and duly stating the reason for reserving it for his assent. A priori, we hold that this is in compliance of Article 254(2). 50. This understanding of Article 254(2) is well settled and reference can be usefully made to the following paragraph of Pt. Rishikesh40: "15. Clause (2) of Article 254 is an exception to clause (1). If law made by the State Legislature is reserved for consideration and receives assent of the President though the State law is inconsistent with the Central Act, the law made by the Legislature of the State prevails over the Central law and operates in that State as valid law. If Parliament amends the law, after the amendment made by the State Legislature has received the assent of the President, the earlier amendment made by the State Legislature, if found inconsistent wit....
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....hat applying the principle of harmonization, both can exist. We find that in view of the State Act receiving the Presidential assent, it will not be necessary to consider the said issue. 69. It is next sought to be urged on behalf of the respondents that the State Act is essentially within the legislative competence of the Union. It is submitted by the respondents that the State legislation is with respect to Entries 12, 13, 14 and 37 of List I of the Seventh Schedule to the Constitution of India and as such, exclusively within the competence of the Central Legislation. Entry 12 deals with United Nations Organization. Entry 13 deals with participation in international conferences, associations and other bodies and implementing of decisions made thereat. Entry 14 deals with entering into treaties and agreements with foreign countries and implementing of treaties, agreements and conventions with foreign countries. Entry 37 deals with foreign loans. 70. It will be apposite to refer to the following observations of the Constitution Bench in the case of Kesoram Industries Ltd. and Others (supra). In the said case, R.C. Lahoti, J., speaking for the maj....
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.... vires and shall have to give way to the Union law. (3) Taxation is considered to be a distinct matter for purposes of legislative competence. There is a distinction made between general subjects of legislation and taxation. The general subjects of legislation are dealt with in one group of entries and power of taxation in a separate group. The power to tax cannot be deduced from a general legislative entry as an ancillary power. (4) The entries in the lists being merelytopics or fields of legislation, they must receive a liberal construction inspired by a broad and generous spirit and not in a narrow pedantic sense. The words and expressions employed in drafting the entries must be given the widestpossible interpretation. This is because, to quote V. Ramaswami, J., the allocation of the subjects to the lists is not by way of scientific or logical definition but by way of a mere simplex enumeratio of broad categories. A power to legislate as to the principal matter specifically mentioned in the entry shall also include within its expanse the legislations touching incidental and ancillary matters. (5) Where the legislative competence ofthe legislature of a....
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.... no consequence. The court has to look at the substance of the matter. The true character of the legislation has to be ascertained. Regard must be had to the enactment as a whole, to its main objects and to the scope and effect of its provisions. It has been held that incidental and superficial encroachments are to be disregarded. It has been held that the predominance of the Union List would not prevent the State Legislature from dealing with any matter within List II, though it may incidentally affect any item in List I. 72. If we look at the scheme of the State enactment, the subject matter of the enactment is arbitration. As has been held by the Constitution Bench in the case of Kesoram Industries Ltd. and Others (supra), if the State is competent to legislate on the subject, any incidental encroachment on any item in List I would not affect the State Legislature. In any case, as already observed hereinabove, this Court, in the cases of G.C. Kanungo (supra) and MP Rural 2018, has specifically held that the 1940 Act, the 1996 Act and the State Acts legislated by the Orissa and M.P. Legislatures are referable to Entry 13 of List III of the Seventh Sched....
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....s to consider the contention on behalf of the respondents that the 1996 Act is enacted by the Parliament under Article 253 of the Constitution of India and since the said Act has been enacted in accordance with the decision taken at the international conference to implement the UNCITRAL Model law, the State Legislature is not competent to enact the State Law. 76. It is submitted that since the 1996 Act has been enacted in accordance with the decision taken by the General Assembly of the United Nations, the same would be referable to Article 253 of the Constitution of India. 77. In this respect, it is to be noted that the Preamble of the 1996 Act would reveal that the recommendation of the General Assembly of the United Nations is for adopting UNCITRAL Model Law insofar as international commercial arbitrations are concerned. It will further be relevant to refer to paragraphs (2) and (3) of the Statement of Objects and Reasons of the 1996 Act : "Statement of Objects and Reasons 1. ............... 2. The United Nations Commission on International Trade Law (UNCITRAL) adopted in 1985 the Model Law on International Commercial Arbitra....
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....ed by the United Nations General Assembly, which reads thus: "40/72. Model Law on International Commercial Arbitration of the United Nations Commission on International Trade Law The General Assembly, Recognizing the value of arbitration as a method of settling disputes arising in international commercial relations, Convinced that the establishment of a model law on arbitration that is acceptable to States with different legal, social and economic systems contributes to the development of harmonious international economic relations, Noting that the Model law on International Commercial Arbitration was adopted by the United Nations Commission on International Trade Law at its eighteenth session, after due deliberation and extensive consultation with arbitral institutions and individual experts on international commercial arbitration, Convinced that the Model Law, together with the Convention on the Recognition and Enforcement of Foreign Arbitral Awards and the Arbitration Rules of the United Nations Commission on International Trade Law recommended by the General Assembly in its resolution 31/98 of 15 December 1976, significantly....
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....isions made thereat." The preamble to the Act clearly states that it was enacted to implement the decisions taken at the United Nations' Conference on the Human Environment held at Stockholm in June 1972. Parliament has enacted the Act under Entry 13 of List I Schedule VII read with Article 253 of the Constitution of India. The CRZ Notification having been issued under the Act shall have overriding effect and shall prevail over the law made by the legislatures of the States." 83. Shri Venugopal further relied on the following observations of this Court in the case of Mantri Techzone Private Limited (supra): "40. The Tribunal has been established under a constitutional mandate provided in Schedule VII List I Entry 13 of the Constitution of India, to implement the decision taken at the United Nations Conference on Environment and Development. The Tribunal is a specialised judicial body for effective and expeditious disposal of cases relating to environmental protection and conservation of forests and other natural resources including enforcement of any legal right relating to environment. The right to healthy environment has been construed as a part of the ri....
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.... Therefore, reliance on the above referred judgments, in our view, would not be of any assistance to the case of the respondents, inasmuch as the Resolution of the General Assembly of the United Nations is only recommendatory in nature and there is no binding decision taken thereat. • STATE LEGISLATURE'S ENCROACHMENT ON JUDICIAL POWERS: 86. We next consider the finding of the High Court that since the State Act, in effect, annuls the awards passed by the Arbitrators and/or the judgments or decrees passed by the courts, it will amount to encroachment on judicial powers of the courts and as such, is hit by the doctrine of separation of powers. 87. A perusal of the list containing details of the Kerala arbitration cases involved in the present matters would reveal that in most of the cases, the awards were passed prior to the year 1992 and the awards were made rule of the court prior to the year 1993. In some of the matters, on the date of the enactment of the State Act, the appeals preferred by the State under Section 39 of the 1940 Act were pending before the competent courts. 88. The appellants have heavily relied on the judgment of thi....
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.... Kumar v. Surinder Kumar [(1969) 2 SCR 244 : AIR 1970 SC 833] . There, this Court was confronted with the question, whether an award made by an arbitrator which had become unenforceable for want of registration under the Registration Act, ceased to be a decision of the arbitrator, which binds the parties or their privies. In that context, this Court observed that an award is entitled to that respect which is due to the judgment and decree of last resort. And if the award which had been pronounced between the parties has become final, a second reference of the subject of the award becomes incompetent. It further observed that if the award is final and binding on the parties, it can hardly be said that it is a waste paper unless it is made a "Rule of Court". Hegde, J. who agreed with the above observations of Sikri, J. (as his Lordship then was) while speaking for Bachawat, J. also observed that the arbitration has the first stage which commences with arbitration agreement and ends with the making of the award, and then a second stage which relates to the enforcement of the award. He also observed that it was one thing to say that a right is not created by the award but it is an enti....
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....l, in turn, getting merged in judgment and decree made by civil court, for the purpose of making the award a "Rule of Court", so as to make it enforceable, cannot arise. What needs to be noted is, that courts even if render their judgments and decrees for making the awards "Rules of Court", those judgments and decrees cannot substitute their own decisions for the decisions of Special Arbitration Tribunals contained in their awards. This situation makes it clear that power exercised by the civil courts in making the awards of Special Arbitration Tribunals "Rules of Court" by their judgments and decrees is not their judicial power exercised in rendering judgments and decrees, as civil courts exercise their powers vested in them for resolving disputes between parties. To be precise, judgments and decrees made by civil courts in making the awards of the Special Arbitration Tribunals the "Rules of Court" for the sole purpose of their enforceability through the machinery of court, cannot make such judgments and decrees of civil court, the decisions rendered by civil courts in exercise of judicial power of the State exclusively invested in them under our Constitution. Thus, when the judgm....
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....nt Act, it admits of no doubt that legislative power of the State Legislature is used by enacting the impugned 1991 Amendment Act to nullify or abrogate the awards of the Special Arbitration Tribunals by arrogating to itself, a judicial power. [See Cauvery Water Disputes Tribunal, Re [1993 Supp (1) SCC 96 (2) : AIR 1992 SC 522 : 1991 Supp (2) SCR 497] ]. From this, it follows that the State Legislature by enacting the 1991 Amendment Act has encroached upon the judicial power entrusted to judicial authority resulting in infringement of a basic feature of the Constitution - the Rule of Law. Thus, when the 1991 Amendment Act nullifies the awards of the Special Arbitration Tribunals, made in exercise of the judicial power conferred upon them under the 1984 Amendment Act, by encroaching upon the judicial power of the State, we have no option but to declare it as unconstitutional having regard to the wellsettled and undisputed legal position that a legislature has no legislative power to render ineffective the earlier judicial decisions by making a law which simply declares the earlier judicial decisions as invalid and not binding, for such powers, if exercised, would not be legislative ....
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....that on one hand, this Court goes on to hold that the judgments and decrees by which the civil courts make the awards "Rules of Court" are not passed in exercise of its judicial powers. As such, the awards do not merge in the judgments and decrees of the court. But on the other hand, the Court goes on to hold that the awards passed by the Special Arbitration Tribunals are the awards passed by the Tribunals exercising the judicial power and as such, when the State nullifies such awards, it abrogates to itself a judicial power and the Statute which annuls it, is unconstitutional being encroachment on the judicial power of the State. 94. Since G.C. Kanungo (supra) has ultimately held the 1991 Amendment Act to be unconstitutional on the ground that it annuls the awards passed by the Special Arbitration Tribunals, it may not be necessary to consider the question as to whether G.C. Kanungo (supra) was right in holding that the judgments and decrees vide which the awards are made "Rules of Court", are not passed in exercise of judicial power. However, the perusal of paragraph 17 in the case of G.C. Kanungo (supra) would reveal that this Court recorded the submissions ....
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....ard is so indefinite as tobe incapable of execution; or (c) where an objection to the legality ofthe award is apparent upon the face of it. (2) Where an award is remitted under sub­section(1) the Court shall fix the time within which the arbitrator or umpire shall submit his decision to the Court: Provided that any time so fixed may be extended by subsequent order of the Court. (3) An award remitted under sub­section (1) shallbecome void on the failure of the arbitrator or umpire to reconsider it and submit his decision within the time fixed. 17. Judgment in terms of award. -- Where the Court sees no cause to remit the award or any of the matters referred to arbitration for reconsideration or to set aside the award, the Court shall, after the time for making an application to set aside the award has expired, or such application having been made, after refusing it, proceed to pronounce judgment according to the award, and upon the judgment so pronounced a decree shall follow, and no appeal shall lie from such decree except on the ground that it is in excess of, or not otherwise in accordance with the award. ..................
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.... of the 1940 Act empowers the court to pronounce a judgment according to the award, and upon the judgment so pronounced a decree is to follow. It further provides that no appeal shall lie on such decree except on the ground that it is in excess of, or not otherwise in accordance with, the award. However, prior to pronouncing the judgment, the court is required to be satisfied that no cause to remit the award or any of the matters referred to arbitration for reconsideration or to set aside the award, is made out. The Court is also required to wait till the time for making an application to set aside the award has expired, or such application having been made, has been refused. 100. The perusal of the scheme of the 1940 Act would itself reveal that the passing of the judgment and decree under Section 17 of the 1940 Act is not a mere formality. The judgment can be pronounced only when the court is satisfied that no cause is made out for remitting the award or setting aside the award. The court is also entitled to remit or modify the awards. As such, it cannot be said that the court, while passing a judgment, which is followed by a decree, does not exer....
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....ent of the power: but the very nature of the jurisdiction requires that it is to be exercised subject to the limitations which apply to the court under Section 155. The proviso to sub­section (8) of Section 111 clearly indicates that in circumstances specified therein reasonable compensation may be awarded in lieu of the shares. This compensation which is to be reasonable has to be ascertained by the Central Government; and reasonable compensation cannot be ascertained except by the application of some objective standards of what is just having regard to all the circumstances of the case. In The Province of Bombay v. Kusaldas S. Advani [(1950) SCR 621] this Court considered the distinction between decisions quasi­judicial and administrative or ministerial for the purpose of ascertaining whether they are subject to the jurisdiction to issue a writ of certiorari, Fazl Ali, J. at p. 642 observed: "The word 'decision' in common parlance is more or less a neutral expression and it can be used with reference to purely executive acts as well as judicial orders. The mere fact that an executive authority has to decide something does not make the decision judicial. ....
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....law in deciding the disputes which come before it. The authority of the Central Government entertaining an appeal under Section 111(3) being an alternative remedy to an aggrieved party to a petition under Section 155 the investiture of authority is in the exercise of the judicial power of the State. Clause (7) of Section 111 declares the proceedings in appeal to be confidential, but that does not dispense with a judicial approach to the evidence. Under Section 54 of the Indian Income Tax Act (which is analogous) all particulars contained in any statement made, return furnished or account or documents produced under the provisions of the Act or in any evidence given, or affidavit or deposition made, in the course of any proceedings under the Act are to be treated as confidential; but that does not make the decision of the taxing authorities merely executive. As the dispute between the parties relates to the civil rights and the Act provides for a right of appeal and makes detailed provisions about hearing and disposal according to law, it is impossible to avoid the inference that a duty is imposed upon the Central Government in deciding the appeal to act judicially." ....
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....i [(1950) SCR 621] and Rex v. Electricity Commissioners [(1924) 1 KB 171] that the action of the Central Government was quasi­judicial and not administrative. It was then observed: "It is in the circumstances apparent that as soon as Rule 52 gives a right to an aggrieved party to apply for review a lis is created between him and the party in whose favour the grant has been made. Unless therefore there is anything in the statute to the contrary it will be the duty of the authority to act judicially and its decision would be a quasi­judicial act." This observation only establishes that the decision is a quasi­judicial one, but it does not say that the Central Government can be regarded as a tribunal. In my opinion, these are very different matters, and now that the question has been raised, it should be decided. The function that the Central Government performs under the Act and the Rules is to hear an appeal against the action of the Directors. For that purpose, a memorandum of appeal setting out the grounds has to be filed, and the company, on notice, is required to make representations, if any, and so also the other side, and both sides are a....
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....er and decide disputes, it is legitimate to regard the officer who deals with the matter and even Government itself as a tribunal. His Lordship further goes on to hold that the officer who decides, may even be anonymous; but the decision is one of a tribunal, whether expressed in his name or in the name of the Central Government. 105. A Constitution Bench of this Court in the case of Shankarlal Aggarwala and Others v. Shankarlal Poddar and Others [1964] 1 SCR 717] , was considering a question as to whether the order passed by the Company Judge confirming the sale was an administrative order or a judicial order. Answering the said question, this Court, speaking through N. Rajagopala Ayyangar, J., observed thus: "On the basis of these provisions, we shall proceed to consider whether the confirmation of the sale was merely an order in the course of administration and not a judicial order. The sale by the liquidator was, of course, effected in the course of the realisation of the assets of the company and for the purpose of the amount realised being applied towards the discharge of the liabilities and the surplus to be distributed in the manner provided by the Act. It would....
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....thority, particularly if that authority were a Court, and if the discretion has to be exercised on objective, as distinguished from a purely subjective, consideration, it would be a judicial decision. It has sometimes been said that the essence of a judicial proceeding or of a judicial order is that there should be two parties and a lis between them which is the subject of adjudication, as a result of that order or a decision on an issue between a proposal and an opposition. No doubt, it would not be possible to describe an order passed deciding a lis before the authority, that it is not a judicial order but it does not follow that the absence of a lis necessarily negatives the order being judicial. Even viewed from this narrow standpoint it is possible to hold that there was a lis before the Company Judge which he decided by passing the order. On the one hand were the Claims of the highest bidder who put forward the contention that he had satisfied the requirements laid down for the acceptance of his bid and was consequently entitled to have the sale in his favour confirmed, particularly so as he was supported in this behalf by the official liquidators. On the other hand there was....
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....heme would clearly reveal that before making an award "Rule of Court" by passing a judgment and decree, the court is required to take into consideration various factors, apply its mind and also exercise its discretion judicially. We find that the aforesaid provisions have not been considered in the case of G.C. Kanungo (supra). The perusal of the aforesaid provisions, as has been considered by us hereinabove, would clearly show that the power exercised by the court under Section 17 of the 1940 Act is a judicial power. We are therefore of the view that the findings in this respect as recorded by this Court in paragraphs 15 to 18 in the case of G.C. Kanungo (supra) would be per incuriam the provisions of the 1940 Act. 108. We further find that the two Constitution Benches in the cases of Harinagar Sugar Mills Ltd. (supra) and Shankarlal Aggarwala and Others (supra) have elaborately considered as to what could be construed as judicial power of a court. In the case of Harinagar Sugar Mills Ltd. (supra), though the power to be exercised was by the Central Government, the Constitution Bench, upon examining the scope of Section 111 of the Companies Act, 1956, held the....
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....gh not expressly overruled, cannot, in its opinion stand with a decision of the House of Lords; and (3) the court is not bound to follow a decision of its own, if it is satisfied that the decision was given per incuriam e.g. where a statute or a rule having statutory effect which would have affected the decision was not brought to the attention of the earlier court. [See Young v. Bristol Aeroplane Co. Ltd. [LR 1944 KB 718 CA] which, on appeal to the House of Lords, was approved by Viscount Simon in LR 1946 AC 163 at p. 169]. A decision of the House of Lords upon a question of law is conclusive and binds the House in subsequent case. An erroneous decision of the House of Lords can be set right only by an Act of Parliament. [See Street Tramways v. London County Council [1898 AC 375] This limitation was repeated by Lord Wright in Radcliffe v. Ribble Motor Services Ltd. [1939 AC 215 at p. 245]" 110. In the case of State of U.P. and Another v. Synthetics and Chemicals Ltd. and Another [(1991) 4 SCC 139], this Court observed thus: "40. 'Incuria' literally means 'carelessness'. In practice per incuriam appears to mean per ignoratium. English courts have developed this principl....
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....67 SC 1480 : (1967) 2 SCR 650 : 20 STC 215] it was observed, 'it is trite to say that a decision is binding not because of its conclusions but in regard to its ratio and the principles, laid down therein'. Any declaration or conclusion arrived without application of mind or preceded without any reason cannot be deemed to be declaration of law or authority of a general nature binding as a precedent. Restraint in dissenting or overruling is for sake of stability and uniformity but rigidity beyond reasonable limits is inimical to the growth of law." 111. This Court further in the case of Sundeep Kumar Bafna v. State of Maharashtra and Another [(2014) 16 SCC 623], observed thus: "19. It cannot be overemphasised that the discipline demanded by a precedent or the disqualification or diminution of a decision on the application of the per incuriam rule is of great importance, since without it, certainty of law, consistency of rulings and comity of courts would become a costly casualty. A decision or judgment can be per incuriam any provision in a statute, rule or regulation, which was not brought to the notice of the court. A decision or judgment can also be per incuriam if it ....
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....s supplied] 115. While considering the discretion to be exercised by the court under Section 16 of the 1940 Act, this Court, in the case of Ramachandra Reddy & Co. v. State of A.P. and Others [(2001) 4 SCC 241] , observed thus: "5. Under the Arbitration Act, Section 16 is the provision under which the court may remit the award for reconsideration of an arbitrator and necessity for remitting the award arises when there are omissions and defects in the award, which cannot be modified or corrected. Remission of an award is in the discretion of the court and the powers of the court are circumscribed by the provisions of Section 16 itself. Ordinarily, therefore, a court may be justified in remitting the matter if the arbitrator leaves any of the matters undetermined or a part of the matter which had not been referred to and answered and that part cannot be separated from the remaining part, without affecting the decision on the matter, which was referred to arbitration or the award is so indefinite as to be incapable of execution or that the award is erroneous on the face of it. Discretion having been conferred on the court to remit an award, the said discretion has to be ju....
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....stence of an arbitration agreement, the Chief Justice when confronted with two points of view presented by the rival parties, is called upon to decide between them and the decision vitally affects the rights of the parties in that, either the claim for appointing an Arbitral Tribunal leading to an award is denied to a party or the claim to have an arbitration proceeding set in motion for entertaining a claim is facilitated by the Chief Justice. In this context, it is not possible to say that the Chief Justice is merely exercising an administrative function when called upon to appoint an arbitrator and that he need not even issue notice to the opposite side before appointing an arbitrator. 37. It is fundamental to our procedural jurisprudence, that the right of no person shall be affected without he being heard. This necessarily imposes an obligation on the Chief Justice to issue notice to the opposite party when he is moved under Section 11 of the Act. The notice to the opposite party cannot be considered to be merely an intimation to that party of the filing of the arbitration application and the passing of an administrative order appointing an arbitrator or an Arbitral T....
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....ate of Kerala and Another [(2014) 12 SCC 696], after an elaborate survey of all the earlier judgments, has summed up the Law on "separation of powers doctrine" under the Constitution of India, as under: "Summary of separation of powers doctrine under the Indian Constitution 126. On deep reflection of the above discussion, in our opinion, the constitutional principles in the context of Indian Constitution relating to separation of powers between the legislature, executive and judiciary may, in brief, be summarised thus: 126.1. Even without express provision of the separation of powers, the doctrine of separation of powers is an entrenched principle in the Constitution of India. The doctrine of separation of powers informs the Indian constitutional structure and it is an essential constituent of rule of law. In other words, the doctrine of separation of power though not expressly engrafted in the Constitution, its sweep, operation and visibility are apparent from the scheme of Indian Constitution. Constitution has made demarcation, without drawing formal lines between the three organs-legislature, executive and judiciary. In that sense, even in the absence ....
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....ce if it is shown as an attempt to interfere with the judicial process, such law may be invalidated being in breach of doctrine of separation of powers. In such situation, the legal effect of the law on a judgment or a judicial proceeding must be examined closely, having regard to legislative prescription or direction. The questions to be asked are: (i) Does the legislative prescription orlegislative direction interfere with the judicial functions? (ii) Is the legislation targeted at thedecided case or whether impugned law requires its application to a case already finally decided? (iii) What are the terms of law; the issueswith which it deals and the nature of the judgment that has attained finality? If the answer to Questions (i) and (ii) is in the affirmative and the consideration of aspects noted in Question (iii) sufficiently establishes that the impugned law interferes with the judicial functions, the Court may declare the law unconstitutional." 120. It could thus be seen that the Constitution Bench in the aforesaid case held that, though a law enacted by the Legislature may apparently seem to be within its competence but yet in substanc....
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....violative of doctrine of "separation of powers". As such, the State Act is liable to be declared unconstitutional on this count. 123. We may also gainfully refer to the observations of this Court in the case of P. Tulsi Das and Others v. Govt. of A.P. and Others [(2003) 1 SCC 364]. In the said case, this Court, while considering the legislative power of the State to enact a law, which amounted to taking away the rights, which are already accrued to the parties long back, has observed thus: "14. On a careful consideration of the principles laid down in the above decisions in the light of the fact situation in these appeals we are of the view that they squarely apply on all fours to the cases on hand in favour of the appellants. The submissions on behalf of the respondent State that the rights derived and claimed by the appellants must be under any statutory enactment or rules made under Article 309 of the Constitution of India and that in other respects there could not be any acquisition of rights validly, so as to disentitle the State to enact the law of the nature under challenge to set right serious anomalies which had crept in and deserved to be undone, d....
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....the appellants and the category of the persons similarly situated whether approached the courts or not seeking relief individually. The provisions contained in Section 2 have to be read down so as to make it only prospective, to save the same from the unconstitutionality arising out of its retrospective application." [emphasis supplied] 124. It could be seen that this Court has held that the provisions of Sections 2 and 3(a) of the Andhra Pradesh Education Service Untrained Teachers (Regulation of Services and Fixation of Pay) Act, 1991 insofar as they purport to take away the rights accrued in favour of the citizens and requiring them to repay or restore them back to the State, are arbitrary, unreasonable and expropriatory. It has, therefore, been held that the said provisions are violative of Articles 14 and 16 of the Constitution of India. 125. As already discussed hereinabove, what has been done by the State Act, is annulling the awards and the judgments and decrees passed by the court vide which the awards were made "Rule of Court". As such, the rights which accrued to the parties much prior to the enactment of the State Act have been sought to be taken aw....