TaxTMI 
TaxTMI 
2016 (8) TMI 1625
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....shtra. The learned Judge further directed that the Appellant shall not encash the bank guarantee of Rs.1,07,92,000/­ offered by Respondent No.1 in favour of the Appellant. 2. In nutshell the facts are :­ The Appellant is a Municipal Council governed under the provisions of the Maharashtra Municipal Councils, Nagar Panchayats and Industrial Townships Act, 1965 (for short 'the Municipal Council's Act'). By virtue of the provisions of Section 143­A of the Municipal Council's Act, the Appellant was within its authority to appoint an agent for collection of octroi. In March,1994, the Appellant issued a tender for collection of octroi for a period of one year beginning with 1 April 1994 to 31 March 1995. The advertisement provided for a reserve price and the term was, any offer lower than Rs.6,74,00,000/­ may not be considered and would be rejected. Another condition of relevance was that during the contract period of one year, the agent shall remit 2% of the contract amount every week to the Appellant irrespective of the actual amount of octroi collection. The other tender conditions were of earnest money of Rs.1,....
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....gainst the decision of the Collector in case of any dispute shall lie first before the Divisional Commissioner and finally before the Government in Urban Development Department. If the agent is dissatisfied with this decision, the agent shall, within a period of 8 days from receipt of the decision, indicates his intention to make an appeal against the order of the Collector, failing which the decision of the Collector shall be conclusive and the same shall not be questioned. If no appeal is received by the Commissioner within a period of 15 days from the declaration of the decision by the Collector, no appeal after the said period is entertainable either by the Commissioner or by the Government." 6. Respondent No.1 after execution of the agreement inter alia on the above contractual conditions, commenced the work of collection of octroi with effect from 1 April 1994. However, on 2 May 1994 Respondent No.1 addressed a letter to the Chief Officer of the Appellant requesting that amount of Rs.6,74,00,000/­ fixed as a minimum reserve price/bid amount, be reduced by Rs.40,78,517/­ on the ground that the same was contrary to the norms fixed by the State....
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....ignature of the Joint Secretary in the Urban Development Department appointed Shri. G.B.Pingulkar, Commissioner, Konkan Division, as an Arbitrator to arbitrate the said dispute. This Government Resolution records that the same was issued by the State Government in pursuance of the powers conferred under Section 143­A(3) of the said Act; and that the same was issued as a special case. Another significant aspect is that the Arbitrator so appointed was called upon to submit an arbitration report to the State Government within a period of one month. It was also provided that the arbitration be undertaken as per the provisions of the Arbitration Act,1940. As the State Government recorded that the Government Resolution is issued in exercise of power conferred under Section 143­A(3) to appoint the learned Arbitrator, it would be useful to note the provisions of Section 143­A, which reads thus:­ "143A. Farming of octroi or appointment of Agent for collection thereof. (1) Notwithstanding anything contained in this Act, it shall be for a Council to lease by public auction the collection of octroi for any period not exceeding one year ....
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.... passing of an Award on the same day. The learned Arbitrator thereafter on 26 December 1994 delivered an award and for the reasons as set out in the Award, held that the minimum reserve price of Rs.6,74,00,000/­ as fixed by the Appellant was not correct and that minimum reserve price ought to be Rs.6,20,089,843/­. The Award was thereafter communicated to the Administrator of the Appellant by a letter dated 9 March 1995 of the Desk Officer, Urban Development Department, Government of Maharashtra. 10. Respondent No.1 having received a copy of the award on 13 March 1995 and being beneficiary of the Award on 31 March 1995 filed Miscellaneous Application No.292 of 1995 before the Court of Civil Judge Senior Division, Thane, under Section 14 read with 17 of the 1940 Act, seeking a direction to the Arbitrator to file before the Court a copy of the Award and the record of arbitration, and prayed that proceedings be taken up in accordance with law for a judgment and decree in terms of the said award dated 26 December 1994. 11. The Appellant however at that stage by a letter dated 10 April 1995 addressed to the Hon'ble Minister, Urban Developme....
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....ntire proceedings are rendered null and void, and are NONEST. In fact and as a matter of fact the entire proceedings are void ab­initio, and in that view of the matter, Award passed by the Respondent No.2 based upon the alleged resolution of the State of Maharashtra, dated 14­11­1994, is rendered non-­est. 6. That the order appointing the Award from the State of Maharashtra by the Petitioner is procured by an unfair mean, as is evident from the very content of the said resolution dated 14­11­1994, which clearly recites that the said resolution was passed "as a Special Case" . This itself goes to show that by an extraneous consideration and in an unauthorised and illegal manner such an order is passed which is liable to be ignored, being without authority of law and without there being any arbitration agreement as contemplated under section 2(1)(a) of the Arbitration Act." Accordingly, a prayer was made that the application of Respondent No.1 for a decree in terms of the award be dismissed. This application of the Appellants was duly verified and signed on affirmation. The Miscellaneous Application thereafter remained pending before the lear....
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....confirming the Award so as to make it as a decree of the court inasmuch as once the Respondent had agreed to the price of Rs.6,75,00,000/­ as a contractual price to be paid to the Appellants in an open tender, then, Respondent No.1 had no reason to reduce the contractual amount. (viii) In any event, there was an estoppel against Respondent No.1 having agreed to accept the tender amount, to take a reverse position and seek reduction of the tender amount quoted by it. Such a contention could not have been accepted by the learned Arbitrator as on a complete knowledge of the documents of the contractual work, the Respondent had submitted its bid in participating in the tender. (ix) The State Government was in a dominating position and had foisted arbitration on the Appellant's showing that at the relevant time the Appellant Council was functioning under the Administrator appointed by the State Government. The Appellants in this situation could in the real sense had no effective representation/participation at the solitary hearing before the learned Arbitrator. (x) It is lastly submitted, the impugned judgment and order cannot be sustained on law and facts. ....
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....itrator was raised by the Appellant for the first time before the learned Trial Judge and thus was wholly not maintainable. (viii) On merits it is submitted that the Respondent no.1 was correct in its approach to raise a dispute on the contractual price of Rs.6,74,50,000/­ as fixed as a minimum bid amount as the same was contrary to the Government Resolution dated 28 February 1994 which ought to have been followed by Respondent No.1. (ix) In fixing the minimum reserve price at Rs.6,74,50,000/­, there was a clear misrepresentation in the tender. (x) Accordingly, the finding as arrived at by the learned Trial Court thus, does not call for any interference. In support of the above submissions Mr.Sakhare has placed reliance on the following decisions:­ (i) N.Chellappan Vs. Secretary, Kerala State Electricity Board-1975 AIR 230 (ii) State of Himachal Pradesh vs. Smt.Lila Devi-AIR 1987 HP 46 16. Having noted the above submissions as urged on behalf of the parties as advanced during the course of arguments, the issues which would arise for our consideration in this appeal are :­ (i) Whether there was a valid arbitration agreement existing betw....
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....ke power to act in the reference and to make an award as if he or they had been appointed by consent of all parties. Section 30­ Grounds for setting aside award.­ An award shall not be set aside except on one or more of the following grounds, namely:­ (a) that an arbitrator or umpire has misconducted himself or the proceedings; (b) that an award has been made after the issue of an order by the Court superseding the arbitration or after arbitration proceedings have become invalid under section 35; (c) that an award has been improperly procured or is otherwise invalid. 20. Application to file in Court arbitration agreement. (1) Where any persons have entered into an arbitration agreement before the institution of any suit with respect to the subject matter of the agreement or any part of it, and where a difference has arisen to which the agreement applies, they or any of them, instead of proceeding under Chapter II, may apply to a Court having jurisdiction in the matter to which the agreement relates, that the agreement be filed in Court. (2) The application shall be in writing and shall be numbered and regist....
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....ntested by application.­ Any party to an arbitration agreement or any person claiming under him desiring to challenge the existence or validity of an arbitration agreement or an award or to have the effect of either determined shall apply to the Court and the Court shall decide the question on affidavits: Provided that where the Court deems it just and expedient, it may set down the application for hearing on other evidence also, and it may pass such orders for discovery and particulars as it may do in a suit." 18. From the scheme of the above provisions of the 1940 Act, it is clear that to constitute an arbitration agreement within the meaning of Section 2(a) of the 1940 Act, it is necessary that there is a written agreement between the parties to submit the present or future differences to arbitration, whether the arbitrator is named or not, that is to mean that the parties are required to be ad idem. It is well settled that mutuality is the very essence of arbitration and, therefore, Section 2(a) provides for a written agreement to submit a dispute to an arbitration. Once the terms for reference to arbitration are reduced in writing, the agreement of the pa....
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....cision, the agent shall, within a period of eight days from the receipt of the decision, indicate his intention to make an appeal against the order of the Collector, failing which decision of the Collector shall be conclusive and the same shall not be questioned. It further provides that if no appeal is received by the Commissioner within a period of 15 days from the declaration of the decision by the Collector, no appeal after the said period is entertainable either by the Commissioner or by the Government. 21. Thus, from a plain reading of clause 22 which we have elaborately dissected at the most it can be considered as a dispute resolution mechanism first by approaching before the Collector and thereafter, in an appeal before the Divisional Commissioner and thereafter before the Government in the Urban Development Department. This clause would thus also not satisfy the test of an arbitration agreement under Section 2(a) of the 1940 Act. 22. Furthermore, it is not a case that the Respondent had invoked Clause 22 and/or as Clause 22 would require, the Collector was not called upon to enter resolution of the dispute. The facts are quite different. As noted a....
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....overnment had any jurisdiction to appoint an arbitrator in terms of the agreement entered between the parties. In the absence of an arbitration agreement, the learned Arbitrator had no jurisdiction to enter the arbitration and conduct the arbitration proceedings in question. 23. Despite the above legal position, Respondent No.1 would contend that as the Appellant participated in the proceedings before the learned Arbitrator the award is valid and cannot be set aside. We do not agree. In our opinion considering the facts and circumstances of the case and more particularly clause 22, it was wholly impermissible for Respondent No.1 to approach the State Government directly and make a unilateral request to make an appointment of an arbitrator. In taking all these steps, Respondent No.2 (Arbitrator) was not oblivious of the fact that the Appellant­ Municipal Council was working under the Administrator appointed by the Government of Maharashtra and that certainly the Administrator was the officer subordinate firstly to the State Government as also to the Revenue Commissioner, Konkan Division who came to be appointed as Arbitrator. Interestingly the fa....
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....sed by a Court without jurisdiction over the subject matter or on the ground which goes to the root of its jurisdiction or lacks inherent jurisdiction is a coram non judice. Therefore, a decree passed by such a Court is a nullity and is non est. Its invalidity can be set up whenever it is sought to be enforced or is acted upon, as a foundation for a right, even at the stage of execution or in collateral proceedings. The defect of jurisdiction strikes at the very authority of the court to pass decree which cannot be cured by consent or waiver of the party. (Re. Sushil Kumar Mehta Vs. Gobind Ram Bohra (Dead) through his LRS (supra)) 25. Thus, the reliance on behalf of Respondent No.1 on the decision of the Supreme Court in the case of "N.Chellappan Vs. Secretary, Kerala State Electricity Board" (supra) and more particularly paragraph 7 of the decision, in our opinion, is not appropriate. This was a case where there was no dispute with regard to existence of an arbitration agreement and the parties willingly appointed arbitrators as also an umpire. As the arbitrators had not made an award within the time limit, the Appellant in the case had....
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.... had no jurisdiction at all. The observations as made by His Lordship in para. 4 of the decision read thus: "(4) If ab initio the arbitrators had no jurisdiction, appearance before the arbitrators and undertaking in the event of a finding that they had jurisdiction to file a defence on merits cannot confer jurisdiction on arbitrators who had no jurisdiction at all." 27. Now coming to the contention as urged on behalf of Respondent No.1 that the application as filed on behalf of the Appellant raising objection to the the validity of the agreement and jurisdiction of the arbitrator to pass an Award, was time barred, also cannot be sustained. This is for the reason that on receiving a notice of the petition (Miscellaneous Application No.292 of 1995 (renumbered as 196 of 1996)), filed by Respondent No.1 on 31 March 1995, praying for a decree in terms of the award, the Appellant submitted its say/ objections dated 27 April 1995 below Exhibit 21 under Section 30 and 33 of the 1940 Act. By this the Appellant raised categorical objections which we have noted above interalia to the effect that there was no arbitration agreement between the parties, that a....
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....may not be any necessity to dwell on the merits of the matter. The parties having advanced their submissions on merits albeit what we have observed above, however for completeness of the record we deal with the same. We may observe that even on merits the things are equally disheartening. The contention as urged on behalf of the Appellant is that Respondent No.1 with open eyes accepted the tender conditions and more particularly of a minimum reserve price being fixed at Rs.6,74,00,000/­ and accordingly submitting its bid at Rs.6,75,00,000/­, having done so Respondent No.1 could not have taken a reverse position to assail this tender condition after the award of the contract and commencement of the contractual work. In this regard we may observe that admittedly the tender in question was a public tender which notified a minimum reserve price of Rs.6,74,00,000/­ on the basis of which Respondent No.1 as also the other bidders submitted their bids. Respondent No.1 however after the contract was awarded, assailed the tender condition as noted above through this process of arbitration seeking to reduce the reserve price byRs.40,78,517/­. In o....