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CASE NO.: Appeal (civil)  5647-5648 of 1997

PETITIONER: Bharat Coking Coal Ltd

RESPONDENT: M/s. Annapurna Construction

DATE OF JUDGMENT: 05/03/2008

BENCH: S.B. Sinha & V.S. Sirpurkar

JUDGMENT: JUDGMENT ORDER  

I.A. NOS. 1-2 OF 2005 IN CIVIL APPEAL NOs. 5647-5648 OF 1997

S.B. SINHA, J :          1.      Which would be the appropriate court for the purpose of filing of an  award by the arbitrator is the question involved herein.   2.      The said question arises in the following circumstances:

       Respondent herein admittedly was a contractor of the appellant.   Disputes and differences having arisen between the parties, the arbitration  agreement was invoked.    An arbitrator was appointed.

       The parties hereto raised their claims and counter-claims before the  arbitrator.  He made an award of Rs.18,97,729.37 in favour of the  respondent.   3.      A question of law was raised when the matter ultimately came up  before the court arising out of the proceedings for making the said award a  rule of the court, and this Court in its judgment dated 29.08.2003 [since  reported in (2003) 8 SCC 154], while setting aside the award, directed:   "40. However, as noticed hereinbefore, this case  stands on a different footing, namely, that the  arbitrator while passing the award in relation to  some items failed and/or neglected to take into  consideration the relevant clauses of the contract,  nor did he take into consideration the relevant  materials for the purpose of arriving at a correct  fact. Such an order would amount to misdirection  in law. 41. We are, therefore, of the opinion that the  matter requires reconsideration. Having regard to  the facts and circumstances of this case and  particularly keeping in view the fact that the matter  relates to pure interpretation of document which  gives rise to question of law and in stead and in  place of remitting the matter to the named  arbitrator, we would direct that the disputes in  relation to Claim Items 3, 7 and 11 be referred to  the Hon’ble Mr Justice D.N. Prasad, a retired  Judge of the Jharkhand High Court on such terms  and conditions as may be mutually agreed upon by  the parties. The learned arbitrator is requested to  consider the desirability of making his award as

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expeditiously as possible keeping in view the fact  that the matter has been pending for a long time."  

4.      Before the learned arbitrator, three claims were raised by the  respondent, viz., Claim Item Nos. 3, 7 and 11.  Claim Item No. 3 related to  extra items which has been rejected.  Claim Item No. 7 related to loss of  profit.  Respondent raised a claim of Rs. 27,77,714/-; an award of Rs.  12,20,289/- was made.  So far as Claim Item No. 11 is concerned, which  related to the escalation of materials, an award of Rs. 90,005/- was made.  It  appears that before the arbitrator parties agreed that the award be filed  before this Court.   However, an objection has been filed by the appellant wherein inter  alia the jurisdiction of this Court to entertain the objection filed under the  Arbitration Act, 1940 (for short "the 1940 Act") has been questioned.

5.      Indisputably, the 1940 Act will apply in this case.

6.      Section 2(c) of the 1940 Act read as under: \0232.  In this Act, unless there is anything  repugnant in the subject or context, -  ***                     ***                     *** ’’Court’’ means a Civil Court having jurisdiction  to decide the questions forming the subject-matter  of the reference if the same had been the subject- matter of a suit, but does not except for the  purpose of arbitration proceedings under Section  21 include a Small Cause Court;\024  

7.      Although strictly, it is not necessary but we may also notice the  change in the definition of the term "court" brought in by the Parliament in  Arbitration and Conciliation Act, 1996 as contained in Section 2(1)(e)  therein which reads as under: \0232. (1) In this Part, unless the context otherwise  requires, -  ***             ***                     ***  (e)     "Court" means the Principal Civil Court of  Original Jurisdiction in a district, and includes the  High Court in exercise of its ordinary original civil  jurisdiction, having jurisdiction to decide the  questions forming the subject-matter of the  arbitration if the same had been the subject-matter  of a suit, but does not include any civil court of a  grade inferior to such Principal Civil Court, or any  Court of Small Causes;\024

8.      It is now a trite law that whenever a term has been defined under a  statute, the same should ordinarily be given effect to.  There cannot,  however, be any doubt whatsoever that the interpretation clause being  prefaced by the words "unless there is anything repugnant in the subject and  context" may in given situations lead this Court to opine that the legislature  intended a different meaning.  [See State of Maharashtra v. Indian Medical  Association and Others (2002) 1 SCC 589 and Pandey & Co. Builders (P)  Ltd. v. State of Bihar and Another (2007) 1 SCC 467]

9.      While determining such a question, the court ordinarily again must  preserve the right of a party to prefer an appeal.  A right of appeal is a  valuable right and unless there exist cogent reasons, a litigant should not be  deprived of the same.  It is a statutory right.   

10.     With the aforementioned background, we may notice a few precedents  operating in the field.

       In State of Madhya Pradesh v. M/s. Saith and Skelton (P) Ltd. [(1972)  1 SCC 702], apart from appointing the arbitrator, this Court extended the  time for making the award.  It was held that this Court would be entitled to

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entertain an application under Section 14(2) read with Section 30 of the  1940 Act stating:

"18. According to Mr Shroff the Award should  have been filed, not in this Court, but in the Court  of the Addl. District Judge, Mandsaur, as that is  the Court which will have jurisdiction to entertain  the suit regarding the subject-matter of the  reference. We are not inclined to accept this  contention of Mr Shroff. It should be noted that the  opening words of Section 2 are "In this Act, unless  there is anything repugnant in the subject or  context". Therefore the expression "Court" will  have to be understood as defined in Section 2( c )  of the Act, only if there is nothing repugnant in the  subject or context. It is in that light that the  expression "Court" occurring in Section 14(2) of  the Act will have to be understood and interpreted.  It was this Court that appointed Shri V.S. Desai, on  January 29, 1971, by consent of parties as an  arbitrator and to make his Award. It will be seen  that no further directions were given in the said  order which will indicate that this Court had not  divested itself of its jurisdiction to deal with the  Award or matters arising out of the Award. In fact  the indications are to the contrary. The direction in  the order, dated January 29, 1971, is that the  arbitrator is "to make his Award". Surely the law  contemplates further steps to be taken after the  Award has been made, and quite naturally the  forum for taking the further action is only this  Court. There was also direction to the effect that  the parties are at liberty to apply for extension of  time for making the Award. In the absence of any  other court having been invested with such  jurisdiction by the order, the only conclusion that  is possible is that such a request must be made  only to the court which passed that order, namely,  this Court."

       It was furthermore observed:   

"21. in Ct. A. Ct. Nachiappa Chettiar v. Ct. A. Ct.  Subramaniam Chettiar the question arose whether  the trial court had jurisdiction to refer the subject- matter of a suit to an arbitrator when the decree  passed in the suit was pending appeal before the  High Court. Based upon Section 21, it was urged  before this Court that the reference made by the  trial court, when the appeal was pending, and the  award made in consequence of such reference,  were both invalid as the trial court was not  competent to make the order of reference. This  Court rejected the said contention and after a  reference to Sections 2( c ) and 21 of the Act held  that the expression "Court" occurring in Section 21  includes also the appellate court, proceedings  before which are a continuance of the suit. It was  further held that the word "suit" in Section 21  includes also appellate proceedings. In our  opinion, applying the analogy of the above  decision, the expression "Court" occurring in  Section 14(2) of the Act will have to be understood  in the context in which it occurs. So understood, it

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follows that this Court is the Court under Sect ion  14(2) where the arbitration Award could be validly  filed."  

11.     The said principle was reiterated in M/s. Guru Nank Foundation v.  M/s. Rattan Singh and Sons [(1981) 4 SCC 634] wherein it was opined:

"18\005By the decision of this Court in the appeal  the 2nd respondent was removed as arbitrator and  the 3rd respondent was appointed as sole  arbitrator. Indisputably, therefore, the arbitrator  was appointed by this Court. The order appointing  the 3rd respondent as arbitrator gave a further  direction that the arbitrator shall enter upon the  reference within 15 days from the date of the  Order of the Court and he should try to dispose of  the same as expeditiously as possible. The final  Order was that the appeal was disposed of in terms  hereinabove indicated. A contention that thereafter  this Court was not in seisin of the matter was urged  relying upon the fact that the appeal was disposed  of by the Order of the Court and that there was no  further proceeding before this Court. This  contention has merely to be stated to be rejected,  as will be presently pointed out. After the disposal  of the appeal, CMP No. 896 of 1977 was presented  to this Court for clarification and/or modification  of the Order of the Court dated January 5, 1977.  This Court by its Order dated February 10, 1977,  gave further directions and a specific time-limit  was fixed by this Court directing the 3rd  respondent as arbitrator to conclude the  proceedings within four months from the date of  Order of the Court. Even with regard to the  conduct of proceedings this Court directed that the  3rd respondent should proceed with the reference  from the stage where it was left by the 2nd  respondent and that not only that he may permit  additional evidence to be led but he must consider  the pleadings and evidence already placed before  the previous arbitrator. This will indisputably show  that this Court had complete control over the  proceedings before the arbitrator."    12.     Both the aforementioned decisions, therefore, proceed on the basis  that the court had complete control over the proceedings of the arbitrator.  In  the instant case, however, the matter came up before this Court whence an  arbitrator had already been appointed and an award had been made.  An  arbitrator was appointed by this Court while setting aside the said award  particularly in view of the fact that construction of the contract was in  question.  The court did not and could not retain any control over the  proceedings of the arbitrator.

13.     Thus, a distinction must be borne in mind in a case where this Court  had no control over the proceedings and the case in which control of  proceedings of the arbitrator had been retained.  In the former case, having  regard to the definition of the term "court" as contained in Section 2(c) of  the 1940 Act, award must be filed before a court which has the requisite  jurisdiction thereover.

14.     We may notice that such a view has been taken by this Court in  National Aluminium Co. Ltd. v. Pressteel & Fabrications (P) Ltd. and  Another [(2004) 1 SCC 540] stating:

"9\005In regard to the forum before which the

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application for modification or setting aside the  award is concerned, we find no difficulty in  coming to the conclusion that in view of the  provisions of Section 34 read with Section 2( e ) of  the 1996 Act it is not this Court which has the  jurisdiction to entertain an application for  modification of the award and it could only be the  principal civil court of original jurisdiction as  contemplated under Section 2( e ) of the Act,  therefore, in our opinion, this application is not  maintainable before this Court."    15.     Yet again in State of Goa v. Western Builders [(2006) 6 SCC 239],  this Court opined:

"21. In National Aluminium Co. Ltd. v. Pressteel  & Fabrications (P) Ltd. unilateral appointment of  the arbitrator under the Arbitration Act, 1940 was  challenged. This Court in the said appeal after  hearing the parties appointed a sole arbitrator.  Before the sole arbitrator both the parties by  consent agreed that the proceedings should be  governed by the provisions of the Arbitration and  Conciliation Act, 1996. The arbitrator proceeded  on that basis and gave a final award. That final  award was challenged. The question arose whether  the proceeding shall be governed by the 1940 Act  or by the 1996 Act? And which is the appropriate  court. The dispute prolonged for nearly 16 years.  This Court dismissed the appeal and held that in  the present case proceedings should go on under  the provisions of the Act, 1996 though the dispute  arose prior to coming into force of the Act, 1996,  the appropriate forum for challenging the award  under Section 34 was the Principal Civil Court of  original jurisdiction as contemplated under Section  2( e ) of the Act, 1996."  

16.     Ordinarily, although there may be cases to the contrary, the principle  that the right of appeal should not be taken away, should be applied. There  might be strong reason to deny the suitor a right of appeal.

17.     In Pandey & Co. Builders (P) Ltd (supra), however, in the fact  situation obtaining therein, this Court held :

"23. In this case, it is not necessary for us to go  into the question as to whether sub-section (3) of  Section 37 of the 1996 Act would debar an appeal  from appellate order passed under sub-section (2)  of Section 37 thereof. The consequences of the  statutory embargo would ensue but then the  question will have to be considered as and when  occasion arises therefor. Sub-section (2) of Section  37 of the 1996 Act prescribes for an appeal to a  court. We do not see any reason as to why having  regard to its plain l anguage, the definition of  "court" shall not be put into service. It may be true  that the interpretation clause provides for "unless  the context otherwise requires". If application of  the interpretation clause contained in Section 2 of  the 1996 Act shall lead to anomalous and absurd  results, one may not stick to the definition but we  do not think that such a case has been made out."  

18.     Reliance has also been placed by Mr. Ajit Kumar Sinha, learned

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counsel appearing on behalf of the appellant on an order of this Court dated  22.08.1997 in M/s. Bharat Coking Coal Ltd. v. H.P. Biswas & Company  [Civil Appeal No. 3504 of 1992] wherein it was directed:

"In this civil appeal an award has been filed by the  Arbitrator appointed by this Court in a proceeding  arising out of Section 8 of the Arbitration Act  before the trial Court.  However, as the appeal  arises out of the proceeding under the aforesaid  section before the trial court, the appointment of  the arbitrator by this Court was in substitution of  the earlier order passed by the Trial Court.  Hence  the appropriate court in which the award is to be  filed will be the Court of First Sub-Judge,  Dhanbad.  Therefore, the Registry is directed to  send the original award as well as the entire  records to the First Sub-Judge, Dhanbad, Bihar.   On receipt of copy of this Order, original award  and the records by the trial court, notice will be  issued to the parties concerned by the trial court  and within 30 days of receipt of such notice  objection, if any, under Section 30 of the  Arbitration Act will be filed by the concerned  objector.  Thereafter the trial court will proceed  further in accordance with law.  The trial court  shall decide the objections, if any, of the parties  concerned to the request for making the award a  rule of the court.  The trial court will dispose of the  proceedings at an early date preferably within a  period of six months from today\005"

19.     A Similar opinion was rendered yet recently by a Bench of this Court  in Garhwal Mandal Vikas Nigam Ltd. v. M/s. Krishna Travel Agency [IA 1  & 2 in SLP (C) No. 18344 of 2004 dated 24.01.2007] wherein it was held:

"Apart from these four cases, which have been  brought to our notice, the position of law is very  clear that in case the argument of learned counsel  is accepted, that would mean that in every case  where this court passes an order, be it on appeal,  from the order passed by the High Court under  Section 11(6) of the Arbitration and Conciliation  Act, 1996, this court will become a Principal Civil  Court of original jurisdiction.  If the argument is  further taken to its logical conclusion that would  mean that the parties will have to approach this  Court  by making an application under Section 34  i.e. for setting aside the award.  The expression  ’Court’ used in Section 34 of the Act will also  have to be understood ignoring the definition of  ’Court’ in the Act.  There is another facet of the  problem.  The party will be deprived of the right to  file an appeal under Section 37(i)(b) of the  Arbitration and Conciliation Act.  This means that  a valuable right of appeal will be lost.  Therefore,  in the scheme of things, the submission of the  learned counsel cannot be accepted..."

       [See also the comments in ’Arbitration, Conciliation and Mediation’,  Second edition by Shri V.A. Mohta, page 82]

20.     It is also not a case where this Court has exercised its jurisdiction  under Sub-section (6) of Section 11 of the Arbitration and Conciliation Act,  1996 as was done in Mcdermott International Inc. v. Burn Standard Co. Ltd.  and Others [(2005) 10 SCC 353].  A similar view has been taken in ITC Ltd.

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v. George Joseph Fernandes and Another [(2005) 10 SCC 425].

21.     As the question of jurisdiction of a Court is involved herein, we are of  the opinion, by consent of the parties also, jurisdiction cannot be assumed by  this court.

22.     We, therefore, for the foregoing reasons as also the binding precedents  are of the opinion that this Court has no jurisdiction to entertain these  applications.  The Registry, therefore, is directed to send the records to the  Court of District Judge, Dhanbad who in turn is directed to transfer the case  to a court having appropriate jurisdiction.  The court concerned is requested  to dispose of the objection filed by the appellant herein as expeditiously as  possible and not later than three months from the date of receipt of records.

23.     The applications are disposed of with the aforementioned directions.   No costs.