Civil Appeal Nos. 6691 of 2005 and 4808 of 2013. Case: State of West Bengal Vs Associated Contractors. Supreme Court

Case Number:Civil Appeal Nos. 6691 of 2005 and 4808 of 2013
Party Name:State of West Bengal Vs Associated Contractors
Judges:R.M. Lodha, C.J.I., Kurian Joseph and Rohinton Nariman, JJ.
Issue:Arbitration and Conciliation Act, 1996 - Sections 2, 2(1), 8, 9, 11, 11(4), 11(5), 11(6), 11(7), 11(8), 11(10), 11(12), 34, 37, 42; Arbitration Act, 1940 - Sections 2, 2(1), 11, 21, 31(4), 42; Code of Civil Procedure (CPC) - Section 15; Constitution of India - Articles 136, 227
Judgement Date:September 10, 2014
Court:Supreme Court
 
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Judgment:

Rohinton Nariman, J.

1. This matter has come before a three Judge Bench by an order of reference of a Division Bench of this Hon'ble Court dated 7th April, 2010. The referral order reads thus:

In this appeal, the question that arises for decision is which Court will have the jurisdiction to entertain and decide an application Under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter for short 'the Act').

2. Mr. Bikas Ranjan Bhattacharya, learned senior Counsel appearing for the Appellants cited the judgments in the case of National Aluminium Co. Ltd. v. Pressteel and Fabrications (P) Ltd. and Anr. (2004) 1 SCC 540, Bharat Coking Coal Ltd. v. Annapurna Construction (2008) 6 SCC 732, Bharat Coking Coal Ltd. v. H.P. Biswas and Co. (2008) 6 SCC 740 and Garhwal Mandal Vikas Nigam Ltd. v. Krishna Travel Agency (2008) 6 SCC 741 in support of his submission that it is only the Principal Civil Court, as defined in Section 2(e) of the Act, which can entertain and decide an application Under Section 34 of the Act for setting aside the Award.

3. Mr. Pradip Ghosh, learned senior Counsel appearing for the Respondent on the other hand submitted that in the present case the Calcutta High Court exercising jurisdiction Under Clause 12 of the Letters Patent had passed an interim order Under Section 9 of the Act before commencement of the arbitration proceedings and by virtue of Section 42 of the Act, it is only the Calcutta High Court which will have jurisdiction to entertain and decide an application Under Section 34 of the Act for setting aside the Award. In support of his submission, he relied upon judgment of this Court in the case of Jindal Vijaynagar Steel (JSW Steel Ltd.) v. Jindal Praxair Oxygen Co. Ltd. (2006) 11 SCC 521.

4. We have perused the decisions cited by learned Counsel for the parties, which are all decisions of two Judges Bench. In our opinion, the law has to be clarified beyond doubt as to which Court will have the jurisdiction to entertain and decide an application for setting aside the Award Under Section 34 of the Act read with Section 2(e) of the Act and other provisions, including Section 42 of the Act. We, therefore, refer the matter to a larger Bench to decide this question of law.

5. Let the papers of this case be placed before Hon'ble the Chief Justice for constituting an appropriate Bench.

6. Till the disposal of the appeal by a larger Bench, the interim order dated 17.05.2007 shall continue to operate.

2. The facts necessary to decide this matter are as follows:

In 1995-96 an Item Rate Tender was duly executed and signed between the Respondent Associated Contractors and the concerned Superintending Engineer for execution of the work of excavation and lining of Teesta-Jaldhaka Main Canal from Chainage 3 Kms. to 3.625 Kms. in Police Station: Mal, District: Jalpaiguri, West Bengal. Para 25 of the said Item Rate Tender and Contract contained an arbitration clause.

3. The Respondent herein filed an application Under Section 9 of the Arbitration Act, 1996 for interim orders in the High Court of Calcutta. A learned Single Judge of the High Court of Calcutta, after granting leave Under Clause 12 of the Letters Patent, passed an ad-interim ex-parte injunction order. This order was continued from time to time until it was confirmed by an order dated 10th December, 1998. Meanwhile, in an application Under Section 11 of the Arbitration Act, Justice B.P. Banerjee (retired), was appointed as an Arbitrator to adjudicate upon the disputes between the parties. A Recalling Application filed by the State was dismissed on 20th January, 2000.

4. An appeal was filed against the order dated 10th December, 1998, confirming the ad-interim ex-parte injunction. On 5th July, 2000, delay in filing the appeal was condoned and on 20th July, 2000, the interim order was stayed by the Division Bench. The Arbitrator was, however, asked to complete the proceedings before him which would go on uninterrupted.

5. Meanwhile, several orders were passed by the High Court regarding remuneration of the Arbitrator and payment of the same. The arbitration proceedings culminated in an Award dated 30th June, 2004 by which the claimant was awarded a sum of Rs. 2,76,97,205.00 with 10% interest from 1st July, 1998 till the date of the Award. If not paid within four months, the same would then attract interest at the rate of 18% per annum. Costs were also awarded in the sum of Rs. 50,000/-. The counter claims of the Respondent were rejected.

6. On 21st September, 2004, the State of West Bengal filed an application Under Section 34 of the 1996 Act to set aside the arbitral Award before the Principal Civil Court of the learned District Judge at Jalpaiguri, West Bengal. On 6th October, 2004, the learned District Judge at Jalpaiguri issued notice to the other side directing the Respondent to appear and file its written objections on or before 4th January, 2004. On 10th December, 2004, the Respondent filed an application Under Article 227 of the Constitution challenging the jurisdiction of the court of the learned District Judge at Jalpaiguri. By the impugned judgment dated 11th April, 2005, a Single Judge of the High Court of Calcutta allowed the petition Under Article 227 holding:

Accordingly, I hold that since the parties already had submitted to the jurisdiction of this Court in its Ordinary Original Civil jurisdiction in connection with different earlier proceedings arising out of the said contract, as indicated above, the jurisdiction of the court of the learned District Judge at Jalpaiguri to entertain the said application for setting aside of the award was excluded Under Section 42 of the said Act. Thus, I find that this Court in its Ordinary Original Civil Jurisdiction is the only court which can entertain an application for setting aside the said award. The Revisional Application, thus, stands allowed. The impugned notice is, thus, quashed.

7. In an S.L.P. filed against this order, Mr. Anip Sachthey, learned advocate for the State of West Bengal, argued that since the application itself made Under Section 9 was without jurisdiction, Section 42 of the Arbitration Act would not be attracted. He argued that the reason the Division Bench stayed the interim order passed Under Section 9 was because it was convinced prima facie that the High Court had no territorial jurisdiction in the matter.

8. Mr. P.K. Ghosh, learned senior advocate for the Respondent, contended that Clause 12 leave had already been granted and a number of orders have been passed after the ad-interim ex-parte order dated 22nd July, 1998 by the learned...

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