M/S Aps Kushwaha (Ssi Unit) vs Municipal Corp.Gwalior & Ors

Non-reportable

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NOS. 1888-1889 OF 2011

[Arising out of SLP [C] No.23767-23768 of 2010]

M/s. A.P.S.Kushwaha (SSI Unit) ... Appellant

Vs.

Municipal Corporation, Gwalior and others ... Respondents

J U D G M E N T

R.V.RAVEENDRAN, J.

Leave granted.

2. The appellant filed an application under section 11(6) of the

Arbitration and Conciliation Act, 1996 (`Act' for short) before the Madhya

Pradesh High Court alleging that on execution of an agreement in regard to

"maintenance of water supply and electrical works in different parts of

Gwalior Municipal Corporation area", a work order was issued to him on

1.5.2002 by the respondent; that as the bills submitted by the appellant were

not paid, it filed a writ petition and that petition was disposed of on

15.2.2006 with a direction to seek reference to arbitration; that clause 29 of

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the General Rules and directions for the Guidance of the contractor

provided for settlement of disputes by arbitration; and that therefore the

appellant was filing the application under section 11(6) of the Act requesting

the Chief Justice to appoint an independent arbitrator to arbitrate upon the

disputes. The designate of the Chief Justice by order dated 11.5.2007

allowed the said application and appointed a retired Judge of the High Court

as arbitrator.

3. Before the Arbitrator, the appellant made claims aggregating to

Rs.76,64,725 with interest at 18% per annum. The respondents contested the

claims contending that work orders were issued only to the extent of

Rs.29,72,331 and there were some irregularities in the issue of work orders

and therefore the appellant was not entitled to payment of any of the bills.

The arbitrator made an award dated 30.1.2008 directing the respondents to

pay a sum of Rs.76,64,725 to the appellant with interest at 9% per annum

from the date of the award till date of payment.

4. The respondents filed an application under section 34 of the Act for

setting aside the award. In the said proceedings, the respondents made an

application raising a preliminary objection that the sole arbitrator had no

jurisdiction as the dispute had to be decided by arbitration under the Madhya

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Pradesh Madhyastham Adhikaran Adhiniyam 1983. The District Judge,

Gwalior before whom the said application was filed rejected the said

preliminary objection by order dated 9.2.2009. The review petition filed by

the respondents seeking review of order dated 9.2.2009 was also dismissed

by the learned District Judge, Gwalior, on 17.7.2009.

5. In the meanwhile the appellant also filed a review application seeking

review of the order dated 11.5.2007 by which the designate of the Chief

Justice allowed the application under section 11(6) of the Act and appointed

an arbitrator. The said review petition was dismissed by the High Court on

8.7.2009.

6. The respondent challenged the orders dated 9.2.2009 and 17.7.2009

before the High Court in an arbitration appeal. The High Court allowed the

appeal by order dated 26.11.2009 and set aside the orders dated 9.2.2009 and

17.7.2009 holding that the arbitral award dated 30.1.2008 passed by the sole

arbitrator was without jurisdiction. The High Court held that the dispute

raised by the appellant could only be decided by the statutory arbitral

tribunal constituted under the 1983 Adhiniyam and therefore the sole

arbitrator appointed by the designate of Chief Justice under section 11(6) of

the Act lacked inherent jurisdiction to decide the disputes. The review

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petition filed by the appellant contractor was dismissed by order dated

30.4.2010. Feeling aggrieved the appellant has challenged the orders dated

26.11.2009 and 30.4.2010 of the Madhya Pradesh High Court.

7. The only question that arises for consideration in this appeal by

special leave is whether there was inherent lack of jurisdiction in the

Arbitrator, thereby nullifying the award.

8. This court, in V.A.Tech Escher Wyass Flovel Ltd. vs. M.P. S.E.Board

(C.A. No.3746/2005 decided on 14.1.2010) held that the provisions of the

Act would apply where there was an Arbitration clause and the provisions of

the 1983 Adhiniyam would apply where there was no Arbitration clause. In

this case it is not in dispute that the contract between the parties contained an

arbitration clause (clause 29). The decision of the High Court that the

provisions of the 1983 Adhiniyam would apply and sole arbitrator appointed

by the designate of the Chief Justice lacked inherent jurisdiction, cannot

therefore be sustained. Though the said Arbitration clause provided for

reference of disputes to a three member Arbitration Board, the designate

chose to appoint a sole arbitrator and that order dated 11.5.2007 attained

finality.

5 9. In SBP & Co. v. Patel Engineering Ltd. [2005 (8) SCC 618], a

constitution bench of this Court held that once the Chief Justice or his

designate appoints an Arbitrator in an application under section 11 of the

Act, after satisfying himself that the conditions for exercise of power to

appoint an arbitrator are present, the arbitral tribunal could not go behind

such decision and rule on its own jurisdiction or on the existence of an

arbitration clause. Therefore the contention of the respondents that the

arbitrator ought to have considered the objection relating to jurisdiction and

held that he did not have jurisdiction, cannot be accepted.

10. The appeals are therefore allowed and the impugned order of the High

Court dated 26.11.2009 is set aside. As a consequence the learned District

Judge, Gwalior will now proceed with the consideration of the application

(Misc. Application (Arbitration) No.29/2008) under section 34 of the Act on

merits in accordance with law.

................................J.

(R V Raveendran)

New Delhi; ................................J.

February 17, 2011. (A K Patnaik)