THE STATE OF JHARKHAND vs. M/S HINDUSTAN CONSTRUCTION CO. LTD

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C.A. No.-001093-001093 - 2006Supreme Court2017 INSC 122414 December 2017Bench: HON'BLE THE CHIEF JUSTICE HON'BLE MR. JUSTICE A.K. SIKRI HON'BLE MR. JUSTICE A.M. KHANWILKAR HON'BLE THE CHIEF JUSTICE HON'BLE MR. JUSTICE ASHOK BHUSHANAuthor: HON'BLE THE CHIEF JUSTICE72 pages
For Petitioner: GOPAL PRASADFor Respondent: KHAITAN & CO.

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REPORTABLE

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURI ICTION CIVIL APPEAL NO. 1093 OF 2006

The State of Jharkhand & Ors. ...Appellant(s)

Versus

M/s Hindustan Construction Co. Ltd. …Respondent(s)

J U D G M E N T

Dipak Misra, CJI

A two-Judge Bench while hearing the present appeal found that there is difference of opinion in relation to the entertainability of an application by this Court for making an award passed by the arbitral tribunal, when it retains seisin over arbitral proceeding, as Rule of the Court and, therefore, referred the matter to the larger Bench for decision on the following question:- Digitally signed by CHETAN KUMAR Date: 2017.12.14 13:48:54 IST Reason: Signature Not Verified

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“Whether this Court can entertain an application for making the award as Rule of the Court, even if it retains seisin over arbitral proceedings?”

2.

The narration of the facts in detail is not necessary to answer the reference. Suffice it to state that as disputes had arisen between the parties, the matter was referred to an arbitrator for adjudication of the disputes and during the said period, the 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

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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 for the following order:- “(i) The claim made by the respondent on January 7, 1994 pursuant to the contract dated April 25, 1989 between the parties which was earlier referred to the Arbitral Tribunal which commenced proceedings on February 15, 1995 and which had remained inconclusive is referred for adjudication to Hon’ble Mr. Justice S.B. Sinha, retired Judge of this Court. (ii) The claim made by the appellant against the respondent in Money Suit No.4 of 1996 – State of Jharkhand and others vs. M/s. Hindustan Construction Company Limited filed by the appellant on April 10, 1996 in the court of Sub- Judge, Saraikella, Jharkhand is also referred for adjudication to Hon’ble Mr. Justice S.B. Sinha, retired Judge of this Court. (iii) The terms and conditions shall be settled by the learned Arbitrator in consultation with the parties. (iv) The parties shall appear before the learned Arbitrator on February 5, 2013. We request the

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learned Arbitrator to conclude the aforesaid arbitration proceedings expeditiously and further observe that the award shall be filed before this Court.” [Underlining is ours]

4.

After reproducing settlement, the Court recorded thus:- “We record and accept the statement of the learned senior counsel for the parties that learned Arbitrator may be requested to decide the claim on merits. We observe accordingly.”

5.

Learned arbitrator concluded the arbitration proceedings and passed the award on 16.10.2015 and filed the same before this Court. The appellants challenged the said award by filing its objections before the Civil Court. Per contra, the respondent filed an affidavit dated 16.06.2016 requesting this Court to pronounce the judgment in terms of the award.

6.

It was contended before the two-Judge Bench that when this Court had directed to file the award in this Court, an application for making the award Rule of the Court is to be filed in this Court, for this Court alone has the juri iction to pronounce the judgment in terms of the award. In this regard, the decisions in Bharat

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Coking Coal Limited v. Annapurna Construction1 and State of West Bengal and others v. Associated Contractors2 were placed reliance upon. Resisting the said submissions, it was urged by the appellant-State that if the Court decides the objections to the award, the party 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)3 .

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 others4 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.

1 (2008) 6 SCC 732 2 (2015) 1 SCC 32 3 (2010) 2 SCC 182 4 (2005) 10 SCC 353

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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.5 and Guru Nanak Foundation v. Rattan Singh and Sons6 wherein it has been held that when an arbitrator is appointed by this Court and further directions are issued, it retains seisin over the arbitration proceedings and in such circumstances, the Supreme Court is the only court for the purposes of Section 2(c) of Act.

8.

The two-Judge Bench perceived the difference of opinion with regard to the entertainability of the application before this Court and directed the matter to be placed before the Chief Justice of India for appropriate orders. That is how the matter has been placed before us.

5 (1972) 1 SCC 702 6 (1981) 4 SCC 634

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9.

We have heard Mr. Ajit Kumar Sinha, learned senior counsel appearing for the appellants and Mr. K.V. Viswanathan, learned senior counsel for the respondent.

10.

It is submitted by Mr. Sinha, learned senior counsel appearing for the appellant-State, that the view expressed in Guru Nanak Foundation (supra) does not state the law correctly and it will be inappropriate to annul the right of appeal of the appellants solely on the ground that this Court, on the consent of the parties, had accepted that the award shall be filed before this Court and, therefore, this Court alone has the juri iction to decide the objections for making the award Rule of the Court. According to Mr. Sinha, the definition of the Court under Section 2(c) of the Act has to be appropriately appreciated and on proper construction of the meaning of the word “Court”, it cannot be said to include the Supreme Court. It is additionally propounded by Mr. Sinha that under the scheme of the Act, the appellants are entitled under law to file the objections before the Sub-Judge whose order is assailable in an appeal before the High Court under Section 39 of the Act,

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and, if this Court becomes the original Court for dealing with the objection/s filed by the parties, then the right of appeal would stand nullified without any intervention of the legislature. In this context, reliance has been placed on State of Karnataka v. Union of India and another7, A.R. Antulay v. R.S. Nayak and another8 and Garikapati Veeraya v. N. Subbiah Choudhry and others9. Mr. Sinha, learned senior counsel, has urged that the position has been made clear in Associated Contractors (supra) wherein the Court has expressed the view that the principles enunciated in Saith and Skelton (supra) and 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 7 (1977) 4 SCC 608 8 (1988) 2 SCC 602 9 1957 SCR 488 : AIR 1957 SC 540

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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 Chettiar10, Commissioner of Sales Tax, State of Gujarat v. Union Medical Agency11, Saith & Skelton (supra) and Whirlpool Corporation v.