(Sanjay Kishan Kaul and M.M. Sundresh, JJ.)
Sweta Construction _________________________________ Appellant;
v.
Chhattisgarh State Power Generation Company Limited ______________________________________________ Respondent.
Civil Appeal No. 3736/2020, decided on August 25, 2022
The Order of the court was delivered by
Order
1. The appellant is the partnership firm stated to be inter alia engaged in business of construction of residential and commercial buildings. A contract was executed on 13.05.2010 between the parties for construction of 36 Unit “D” type staff quarters including, internal water supply, sanitation, electrification and construction of road culverts and drain for all type of staff quarters at Janjgir, Champa for the benefit of the respondent power generation company. The total value of the contract was Rs. 05,90,04,326/- and the stipulated time period for completion of work was fifteen months. Thus, the contract period was to end on 24.08.2011.
2. It is the say of the appellant that during the execution of work there occurred hindrances of several varying natures with the result there was no desired progress in execution of the works. The appellant thus sought extension of time to complete the works which was granted upto 31.07.2012. In fact, the work continued even after that time period expired. However, on 11.04.2013, the respondent terminated/closed the contract for a total amount of Rs. 02,74,50,407/- and assigned it to another agency. The aforesaid, as per the appellant was done wrongfully and the last running bill was raised by the appellant on 22.08.2013.
3. It appears that endeavours to settle the differences between the parties were not fulfilled as it is almost after 2½ years that the appellant invoked the arbitration clause 27 of General Conditions of Contract (GCC) and requested the respondent to appoint an Arbitrator for resolution of disputes between the parties on 12.02.2016. This was acknowledged by the respondent who intimated that the request was under progress in terms of letter dated 11.03.2016. It was finally on 06.04.2016 that the respondent intimated a panel of two Arbitrators to the appellant and requested the appellant to give a consent to one of the Arbitrators. After some communication about the qualifications of the Arbitrators, the appellant consented to the appointment of one S.M. Khare, former General Manager (Project; Engineering-Civil), NTPC Limited, Delhi as the sole Arbitrator. There were certain other communications also exchanged about the fee to be paid, the venue of the proceedings etc, but which are not germane in the present controversy.
4. The appellant preferred a claim petition and there was no counter claim filed. The reply to the claim petition was filed and fast track arbitration proceedings were adopted whereby documents were taken on record as agreed upon and finally the learned Arbitrator passed an award in favour of the appellant on 09.06.2017 awarding a sum of Rs. 02,65,87,583/-, inclusive of interest upto the date of the award to be paid within sixty days of the publication of the award, failing which simple interest @ 13.85% per annum would accrue. Once again it is not necessary for us to look into the merits of the award in the present proceedings.
5. The respondent assailed the arbitral award by preferring a petition under Section 34 of the Arbitration and Conciliation Act, 1996 (for short, “the 1996 Act”) on 29.08.2017. Apart from the merits of the award, it was alleged that the sole Arbitrator had no jurisdiction to adjudicate the disputes inter se the parties on account of the existence of the Chhattisgarh Madhyastham Adhikaran Adhiniyam, 1983 (for short, “the Adhiniyam”) and that the appointment process for the Arbitrator had gone through by the respondent under a misconception/misconceived legal opinion. This petition was contested by the appellant. However, the Commercial Court, Atal Nagar, Naya Raipur accepted this plea and set aside the award vide judgment dated 31.08.2018 solely on the ground of the Arbitrator having no jurisdiction.
6. The appeal preferred by the appellant under Section 37 of the 1996 Act inter alia raised the plea that the respondent was barred from taking the plea in respect of the jurisdiction in view of the own conduct of the respondent. However, the appeal was dismissed on 07.02.2019 with liberty to submit a fresh application before the Tribunal under the Adhiniyam with an application for extension of time under Section 14 of the Limitation Act, 1963, if permissible in law.
7. It is against the aforesaid judgment that the special leave petition was filed before this Court. Notice was issued on 19.07.2019 noticing the judgment of this Court in M.P. Rural Road Development Authority v. L.G. Chaudhary Engineers and Contractors1. Leave was granted on 17.11.2020. That is how the present appeal has come up for hearing on expeditious basis as it is an arbitration case.
8. We have heard learned counsel for parties on the limited contours of the issue whether the respondent could have succeeded on account of lack of jurisdiction of the Arbitrator in making the award.
9. In order to complete the sequence in which certain judicial pronouncements have been made, we may notice that prior to the dispute arising but post the award of the contract, a judgment was pronounced in M.P. Rural Road Development Authority v. L.G. Chaudhary Engineers and Contractors2 on 24.01.2012 where there was cleavage of judicial opinion on the question whether an opinion would cover a dispute even after termination of a works contract and the matter was referred to a larger Bench. This had put a law on the applicability of the Adhiniyam in a flux in an interregnum period of time. It is in these proceedings that a judgment was delivered subsequently on 08.03.2018 by a three Judge Bench which settled this cleavage of judicial opinion and which was recorded while issuing notice.
10. If the aforesaid judgment is scrutinized, it was opined that the State law being the Adhiniyam would prevail in terms of Section 2 (4) of the 1996 Act and thus any reference under the State law was valid and could be decided in accordance with the said Adhiniyam. The challenge laid to such reference was thus set aside in various matters. The matter, however, did not end at this as there was a second category of cases where the proceedings were pending before the Arbitrator and in those cases, it was directed that the proceedings would stand transferred to the State Tribunal which may proceed further taking into account the proceedings which have already taken place. The plea that in view of Section 16(2), the objection to jurisdiction could not be raised after the statement of defence was filed, was turned down on the ground that since the special leave petition was filed prior to the filing of statement of defence where the objection was raised.
11. A third position arose as was discussed in paragraph 17 of that judgment which reads as under:
“We do not express any opinion on the applicability of the State Act where award has already been made. In such cases if no objection to the jurisdiction of the arbitration was taken at relevant stage, the award may not be annulled only on that ground.”
12. Thus what was opined was that where awards have already been made and if no objection to the jurisdiction was taken at the relevant stage, the award may not be annulled “only” on that ground and the appeals dealing with those aspects were granted a favourable consideration.
13. In the very same judgment while dealing with another appeal, it was recorded that “no objection having been raised by the respondents in terms of Section 16(2) of the Arbitration and Conciliation Act, 1996 at appropriate stage within time stipulated, the award could not have been annulled”. It was however, clarified in the very next paragraph that the order would not debar proceedings under Section 34 of the 1996 Act.
14. The aforesaid view was followed by a two judge Bench on 10.01.2020 in Civil Appeal No. 204/2020 by an order made on that date.
15. However, as pointed by learned counsel for the respondent, there appears to be some lack of clarity on the issue raised in the present petition on account of the same three Judge Bench having opined in another order passed in Lion Engineering Consultants v. State of Madhya Pradesh3 on 22.03.2018 i.e., about three weeks after that. The issue however, raised was whether there was any bar to the plea of jurisdiction being raised by way of an objection under Section 34 of the 1996 Act even if no objection was raised under Section 16 of that Act. It was opined that public policy of India refers to law enforced in India i.e., both Central law as well as the State law. The respondent State was given liberty to argue before the trial Court its objections that 1996 Act stood excluded by the State Adhiniyam even without formal pleadings being a pure legal plea. This was in the context of an amendment sought being beyond limitation. In that context there is an observation in one sentence, “we do not see any bar to plea of jurisdiction being raised by way of an objection under Section 34 of the Act even if no objection was raised under Section 16 of that Act.”
16. If we appreciate the aforesaid observation and that too emerging from identical Bench in the two matters, we would have to construe as what is meant by this sentence extracted aforesaid. We take note of the fact that this is an order and not a judgment. The controversy before the court was something different as noticed by us aforesaid. In that context, this sentence has been inserted, but that does not take away the law laid down in the substantive judgment dealing with the issue at hand in respect of awards already made where petitions were pending before the competent Court under Section 34 of the said Act. This Court in the context of the 1996 Act and the Adhiniyam, keeping in mind the cleavage of judicial view earlier and expounding on the law in that judgment has in succinct terms set out that the objections under Section 34 of the said Act, where no such plea of jurisdiction was raised in proceedings before the Arbitrator, should not be dealt with “alone” on the plea of jurisdiction i.e., it should be considered on merits. One can say that possibly this part of the order can also be read as one made under Article 142 of the Constitution of India to do substantive justice inter se the parties, more so, when arbitration as an alternative dispute resolution mechanism presupposes an expeditious disposal of commercial disputes and that objective would stand nullified if a contrary view was taken.
17. We are also of the view that in particular facts of the present case, the position is even more gross because when the appellant claimed arbitration, the respondent accepted invocation of arbitration, suggested a panel of Arbitrators, the appellant chose one of the Arbitrators out of the two suggested and the Arbitrator was so appointed as the sole Arbitrator. Thus, the arbitration proceedings commenced in pursuance to the acts of the respondent and it cannot be permitted to get away to say that the whole process was gone through because of some misconception or inappropriate legal advice. Arbitration by consent is always possible. The mode and manner of conduct of arbitration is possible and how those arbitration proceedings would be governed is also a matter of consent. If at all there were any rights of the respondent to have claimed arbitration under the Adhiniyam, that right was never exercised or waived. The respondent cannot be permitted to approbate and reprobate and that too in arbitration proceedings and that too in dispute or resolution through the method of arbitration defeating the very purpose of an alternative dispute resolution to arbitration as an expeditious remedy.
18. We are thus of the view that the impugned judgment of the Commercial Court dated 31.08.2018 and the Division Bench dated 07.02.2019 cannot be sustained and are accordingly set aside and the matter remitted to the Commercial Court to be determined on the merits of the controversy dehors the issue of jurisdiction in accordance with the principles under Section 34 of the 1996 Act. The matter has already seen considerable time period pass in this technicality and we are sure that the commercial Court would bestow early consideration to the matter keeping in mind the very objective of resolution of disputes through arbitration.
19. The appeal is accordingly allowed and though normally commercial litigation must result in commercial costs, in view of the peculiar facts of the present case arising from the judicial pronouncements of this Court, we desist from doing so.
SUPREME COURT OF INDIA
RECORD OF PROCEEDINGS
Civil Appeal No(s). 3736/2020
M/s. Sweta Construction.….Appellant(s)
v.
Chhattisgarh State Power Generation Company Limited.….Respondent(s)
([PART-HEARD BY HON’BLE SANJAY KISHAN KAUL AND HON’BLE M.M. SUNDRESH, JJ.])
Date: 25-08-2022 This appeal was called on for hearing today.
(Before Sanjay Kishan Kaul and M.M. Sundresh, JJ.)
UPON hearing the counsel the Court made the following
ORDER
20. The appeal is allowed in terms of the signed order and though normally commercial litigation must result in commercial costs, in view of the peculiar facts of the present case arising from the judicial pronouncements of this Court, the Court desists from doing so.
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1 (2018) 10 SCC 826
2 (2012) 3 SCC 495
3 (2018) 16 SCC 758
