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CASE NO.: Appeal (civil)  4780 of 2006

PETITIONER: M/s. Pandey & Co. Builders Pvt. Ltd

RESPONDENT: State of Bihar & Anr

DATE OF JUDGMENT: 10/11/2006

BENCH: S.B. Sinha & Dalveer Bhandari

JUDGMENT: J U D G M E N T (Arising out of SLP (C) No. 8861 of 2006)  

S.B. SINHA, J.

Leave granted.

       The parties hereto entered into a contract in terms whereof Appellant  herein undertook a contract for execution of canal repair work for Rs.  11,33,421/-.  An additional agreement was entered into by and between the  parties.  The said contract contained an arbitration clause being Clause 23 of  the contract.   

       Disputes and differences having arisen between the parties, Appellant  invoked the said arbitration clause.  The Superintending Engineer of the  Circle who was the named Arbitrator entered into reference.  There being  alleged undue delay in conclusion of the proceedings of the arbitral tribunal,  a notice was served by Appellant purported to be in terms of Sections 14 and  15 of the Arbitration and Conciliation Act, 1996 (for short "the 1996 Act").   The named Arbitrator retired and his successor did not proceed with the  reference for a long time.  Another notice was issued by Appellant asking  the then incumbent of the office of Superintending Engineer to proceed with  the arbitration.  He, however, instead of proceeding with the arbitration  sought for directions in this behalf from his superior officers.  On 23.8.2002,  he expressed his inability to continue with the proceedings.  A notice under  Section 14 of the 1996 Act was again served.  A proposal was made  thereunder to nominate another independent person as an Arbitrator.  The  Irrigation Department of the State of Bihar asked the Superintending  Engineer to conclude the arbitration proceedings within three months by an  office order dated 20th November, 2002.   

       An objection, however, was filed by Appellant questioning the  jurisdiction of the said Arbitrator on the premise that his nomination has  already been terminated.  On the said plea that the named Arbitrator in terms  of Clause 23 could not have functioned as such, an application under Section  11 of the 1996 Act was filed before the Chief Justice of the Patna High  Court.  Justice P.S. Sahay, a former Judge of the Patna High Court was  appointed but the Superintending Engineer fixed a date for hearing on  12.2.2003 by an order dated 8.2.2003, to which an objection was raised by  Appellant.  Appointment of Justice P.S. Sahay was intimated to the said  Superintending Engineer.   

       An award was passed by the Superintending Engineer on 20th  February, 2003.  In the meantime, Appellant had filed his claim before  Justice P.S. Sahay.  Respondents also appeared on 21.2.2004 and filed an  application under Section 14 of the 1996 Act seeking termination of his  mandate on the ground that the earlier Arbitrator has already given his  award.  The learned Arbitrator held that he had no jurisdiction to proceed

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with the matter.   

       A purported appeal was filed thereagainst by Appellant under Section  37 of the 1996 Act before the High Court.  By reason of the impugned  judgment, the High Court opined that it had no jurisdiction to hear the  appeal as in terms of Sub-section (2) of Section 37 of the 1996 Act, the  appeal lay before the District Court.  A review application filed thereagainst  was also dismissed.

       It is not in dispute that in terms of Section 16 of the 1996 Act, the  Arbitrator could have determined his own jurisdiction.  The learned  Arbitrator, nominee of the Chief Justice of the High Court, opined that there  could not be two awards in one proceeding.  It was held:

"19. Thus, on a careful consideration of the  submission made on behalf of the parties and after  going through the papers filed by them, I hold that  I have no jurisdiction to continue with this  proceedings for the reasons, mentioned above."

       The High Court in passing the impugned judgment opined that the  Patna High Court having no original jurisdiction, in view of the provisions  contained in the Bengal, Agra and Assam Civil Courts Act, 1857 (for short  "the 1857 Act"), the appeal filed under Section 37(2) of the 1996 Act was  not maintainable before it stating:

"Accordingly, I am of the opinion that this Court  being not a court of ordinary original civil  jurisdiction to entertain the suit had the subject  matter of the arbitration being the subject matter of  the suit, the appeal is not maintainable.

       Accordingly, I sustain the preliminary  objection raised by Mr. Lalit Kishore.  Appellant,  if so desire may take recourse to the remedy  available to it before the competent forum."

       Two submissions were made on behalf of Appellant before us, viz, :

(i)     Having regard to the definition of "court" as contained in Section  2(1)(e) of the 1996 Act, the court of the Principal Civil Court  should be held to be not empowered to hear an appeal against an  order of the arbitral tribunal insofar as if Section 37 of the 1996  Act is not construed, a second appeal being prohibited, no appeal  shall ever lie against the order of the District Judge, Principal Civil  Court before the High Court. (ii)    As the order of the nominee of the Chief Justice of the Patna High  Court under Section 11 of the 1996 Act is a judicial order, in view  of the provisions contained in Section 42 thereof, a proceeding was  maintainable only before the High Court.

       The purport and object sought to be achieved by the 1996 Act vis-‘- vis the Arbitration Act, 1940 (for short "the 1940 Act") is well known.

The 1996 Act makes a radical departure from the 1940 Act. It has  embodied the relevant rules of the modern law but does not contain all the  provisions thereof.  The 1996 Act, however, is not as extensive as the  English Arbitration Act.

       Different statutes operated in the field in respect of a domestic award  and a foreign award prior to coming into force of the 1996 Act, namely, the  1940 Act, the Arbitration (Protocol and Convention) Act, 1937 and the  Foreign Awards (Recognition and Enforcement) Act, 1961.  All the

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aforementioned statutes have been repealed by the 1996 Act.  It makes  provisions in two different parts, namely, matters relating to domestic award  and foreign award respectively.

       The Scheme of 1996 Act is absolutely distinct and different from the  1940 Act as also the 1961 Act.

       In the 1940 Act, no reason was required to be stated in the award  unless otherwise agreed upon.  In the 1996 Act, reasons are required to be  stated unless agreed to otherwise by the parties.  The court’s intervention is  sought to be minimized under the provisions of the 1996 Act not only having  regard to the concerns expressed in the international community as regards  delay in the arbitration proceedings but also in view of the fact that an award  under the 1996 is to be a reasoned one.  In a large number of judgments, this  Court has emphasized that the extent of power of the court’s intervention in  relation to a reasoned award and unreasoned one would be different.   Whereas in relation to an unreasoned award, the court’s jurisdiction to  interfere with the award was absolutely limited, a greater latitude had been  given in relation to a reasoned award.

       After the 1996 Act came into force, under Section 16 of the Act the  party questioning the jurisdiction of the Arbitrator has an obligation to raise  the said question before the Arbitrator.  Such a question of jurisdiction could  be raised if it is beyond the scope of his authority.  Such a question was  required to be raised during arbitration proceedings or soon after initiation  thereof as a preliminary issue.   

       Unlike the 1940 Act, the Arbitrator is entitled to determine his own  jurisdiction.  In the event, the Arbitrator opines that he has jurisdiction in the  matter, he may proceed therewith, which order can be challenged along with  the award in terms of Section 34 of the 1996 Act.  If the Arbitrator opines  that he has no jurisdiction to hear the matter, an appeal lies before the court.   ’Court’ has been defined in Section 2(1)(e) of the 1996 Act in the following  terms:

""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;"

       It is not disputed before us that the Patna High Court does not exercise  any original civil jurisdiction.  The definition of "court" as noticed  hereinbefore means the Principal Civil Court of original jurisdiction in a  district and includes the High Court which exercises the original civil  jurisdiction.  If a High Court does not exercise the original civil jurisdiction,  it would not be a ’court’ within the meaning of the said provision.   Constitution of the courts vis-‘-vis the hierarchy thereof is governed by the  1857 Act, Section 3 whereof reads as under:

"3. Classes of Courts \026 There shall be the  following classes of Civil Courts under this Act,  namely: -  (a)     The Court of the District Judge; (b)     The Court of the Additional Judge; (c)     The Court of the Subordinate Judge; and (d)     The Court of the Munsif."

       Chapter III of the 1857 Act relates to ordinary jurisdiction of the civil  courts.  Section 18 provides for extent of original jurisdiction of District and  Subordinate Judge in the following terms:

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"18. Extent of original jurisdiction of District or  Subordinate Judge \026 Save as otherwise provided  by any enactment for the time being in force, the  jurisdiction of a District Judge or Subordinate  Judge extends, subject to the provisions of Section  15 of the Code of Civil Procedure, 1908 to all  original suits for the time being cognizable by  Civil Courts."

       The rules framed by the Patna High Court in exercise of its  jurisdiction under Article 225 of the Constitution of India also do not  authorize it to entertain a suit as a court of original jurisdiction.

       Section 37 of the 1996 Act reads as under:

"37. Appealable orders.\027(1)  An appeal shall lie  from the following orders (and from no others) to  the Court authorised by law to hear appeals from  original decrees of the Court passing the order,  namely:\027     (a)  granting or refusing to grant any  measure under section 9:                           (b) setting aside or refusing to set aside an  arbitral award under section 34.   (2)  An appeal shall also lie to a court from an  order of  the arbitral tribunal\027   (a)  accepting the plea referred to in sub- section (2) or sub-section (3) of section 16;  or                     (b)  granting or refusing to grant an interim  measure under section 17.   (3)  No second appeal shall lie from an order  passed in appeal under this section, but nothing in  this section shall affect or taken away any right to  appeal to the Supreme Court."

       An appeal in terms of Sub-section (2) of Section 37 is a statutory  appeal.  It may be true that Sub-section (3) of Section 37 of the 1996 Act  debars a second appeal from an appellate order under Sub-sections (1) and  (2) thereof but having regard to Section 5 of the 1996 Act, the provisions for  second appeal may be held to be superfluous.   

       In The Law and Practice of Arbitration and Conciliation by O.P.  Malhotra and Indu Malhotra, page 1270, it is stated:

"In the context of this Act, s 37(3) barring second  appeal against an appellate order under s 37(1) and  (2) is really superfluous.  This Act has not enacted  any provision analogous to s 41 of the previous  Act.  It is radically different from the Act of 1940.   Therefore, the Code of Civil Procedure 1908  proprio vigore does not apply to the proceedings  before the court in its original or appellate  jurisdiction.  Section 5 imposes a blanket ban on  judicial intervention of any type in the arbitral  process except ’where so provided under Part I’ of  this Act.  Pursuant to this provision, s 37(1)  provides appeals against certain orders of the

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court, while s 37(2) provides appeal against certain  orders of the arbitral tribunal.  However, s 37(3)  prohibits a second appeal against the appellate  order under s 37(1) and (2).  However, in view of  the provisions of s 5, a second appeal against the  appellate order under s 37(1) and (2) would not be  permissible, even if s 37(3) had not been enacted.   It was, therefore, not really necessary to enact this  provision, and it seems to have been enacted by  way of abundant caution."

       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  language, 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.

       Section 42 of the 1996 Act, to which our attention has been drawn by  the learned counsel appearing for Appellant, in the instant case has no  application.  The said provision reads, thus:

"42. Jurisdiction.\027Notwithstanding anything  contained elsewhere in this Part or in any other law  for the time being in force, where with respect  to  an arbitration agreement any application under this  Part has been made in a Court, that Court alone  shall have jurisdiction over the arbitral proceedings  and all subsequent applications arising out of that  agreement and the arbitral proceedings shall be  made in that Court and in no other Court."

       An order passed by a Chief Justice or his nominee under Sub-section  (6) of Section 11 of the 1996 Act may be a judicial order, as has been held  by a Seven-Judge Bench of this Court in SBP & Co. v. Patel Engineering  Ltd. and another [(2005) 8 SCC 618] but the same does not take away the  effect of the appellate jurisdiction to be exercised by a court under Sub- section (2) of Section 37 of the 1996 Act.

       Section 42 of the 1996 Act refers to applications and not to appeals.   

       Reliance placed by the learned counsel on M/s. Guru Nanak  Foundation v. M/s. Rattan Singh and Sons [(1981) 4 SCC 634] is not  apposite.  Therein, the court was dealing with a provision of Sub-section (4)  of Section 31 of the 1940 Act and as the appointment was made by the High  Court, it was held that an application for setting aside of the award in terms  of Sub-section (4) of Section 31 of the 1940 Act would lie before this Court.   It is significant to note that therein also a contention of losing of a further  right of appeal was raised and rejected in the following terms:

"Mr Narula lastly urged that if this Court were to  arrogate jurisdiction to itself by the putting on sub- section (4) of Section 31 a construction as  canvassed for on behalf of the 1st respondent it  would deprive the appellant of its valuable right to  prefer an appeal under the letters patent and

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approach this Court under Article 136 of the  Constitution. If this Court has jurisdiction to  entertain the Award and this Court in view of  Section 31(4) alone has jurisdiction for  entertaining the Award meaning that the Award  has to be filed in this Court alone and no other, the  same cannot be defeated by a specious plea that  the right of appeal would be denied\005"

       Section 31(4) of the 1940 Act reads, thus:

"(4) Notwithstanding anything contained  elsewhere in this Act or in any other law for the  time being in force, where in any reference any  application under this Act has been made in Court  competent to entertain it, that court alone shall  have jurisdiction over the arbitration proceedings  and all subsequent applications arising out of that  reference and the arbitration proceedings shall be  made in that court and in no other Court."

         In M/s. Guru Nanak Foundation (supra), analysing the said provision,  this Court held:   "\005It opens with a non-obstante clause and is  comprehensive in character. The non-obstante  clause excludes anything anywhere contained in  the whole Act or in any other law for the time  being in force if it is contrary to or inconsistent  with the substantive provision contained in sub- section (4). To that extent it carves out an  exception to the general question of jurisdiction of  the court in which Award may be filed elsewhere  provided in the Act in respect of the proceedings  referred to in sub-section (4). The provision  contained in sub-section (4) will have an  overriding effect in relation to the filing of the  Award if the conditions therein prescribed are  satisfied. If those conditions are satisfied the court  other than the one envisaged in Section 14(2) or  Section 31(1) will be the court in which Award  will have to be filed. That is the effect of the non- obstante clause in sub-section (4) of Section 31.  Sub-section (4) thus invests exclusive jurisdiction  in the court, to which an application has been made  in any reference and which that court is competent  to entertain as the court having jurisdiction over  the arbitration proceedings and all subsequent  applications arising out of reference and the  arbitration proceedings shall have to be made in  that court and in no other court. Thus sub-section  (4) not only confers exclusive jurisdiction on the  court to which an application is made in any  reference but simultaneously ousts the jurisdiction  of any other court which may as well have  jurisdiction in this behalf. To illustrate the point, if  an Award was required to be filed under Section  14(2) read with Section 31(1) in any particular  court as being the court in which a suit touching  the subject-matter of Award would have been  required to be filed, but if any application in the  reference under the Act has been filed in some  other court which was competent to entertain that

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application, then to the exclusion of the first  mentioned court the latter court alone, in view of  the overriding effect of the provision contained in  Section 31(4), will have jurisdiction to entertain  the Award and the Award will have to be filed in  that court alone and no other court will have  jurisdiction to entertain the same."

         In Mukesh K. Tripathi v. Senior Division Manager, LIC and Others  [(2004) 8 SCC 387], this Court observed:

"The interpretation clause contained in a statute  although may deserve a broader meaning having  employed the word "includes" but therefor also it  is necessary to keep in view the scheme of the  object and purport of the statute which takes him  out of the said definition. Furthermore, the  interpretation section begins with the words  "unless the context otherwise requires". In Ramesh Mehta v. Sanwal Chand Singhvi, it was  noticed: (SCC p. 426, paras 27-28) "A definition is not to be read in isolation. It must  be read in the context of the phrase which would  define it. It should not be vague or ambiguous. The  definition of words must be given a meaningful  application; where the context makes the definition  given in the interpretation clause inapplicable, the  same meaning cannot be assigned. In State of Maharashtra v. Indian Medical Assn.   one of us (V.N. Khare, C.J.) stated that the  definition given in the interpretation clause having  regard to the contents would not be applicable. It  was stated: (SCC p. 598, para 8) ’A bare perusal of Section 2 of the Act shows that  it starts with the words "in this Act, unless the  context otherwise requires \005". Let us find out  whether in the context of the provisions of Section  64 of the Act the defined meaning of the  expression "management" can be assigned to the  word "management" in Section 64 of the Act. In  para 3 of the Regulation, the Essentiality  Certificate is required to be given by the State  Government and permission to establish a new  medical college is to be given by the State  Government under Section 64 of the Act. If we  give the defined meaning to the expression  "management" occurring in Section 64 of the Act,  it would mean the State Government is required to  apply to itself for grant of permission to set up a  government medical college through the  University. Similarly it would also mean the State  Government applying to itself for grant of  Essentiality Certificate under para 3 of the  Regulation. We are afraid the defined meaning of  the expression "management" cannot be assigned  to the expression "management" occurring in  Section 64 of the Act. In the present case, the  context does not permit or requires to apply the  defined meaning to the word "management"  occurring in Section 64 of the Act.’"

       In M/s. Raval and Co. v. K.G. Ramachandran and Others [(1974) 1  SCC 424], whereupon reliance has been placed by the leaned counsel, the

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question arose as to whether the landlord can file an application for fixation  of fair rent under Tamil Nadu Buildings (Lease and Rent Control) Act, 1960.   In that context, it was held:

"\005As the object of the statute was to protect those  inhabitants who had previously no access to the  rates (which the churchwardens had), the meaning  of the term "inhabitants" was limited to them. The  same approach in interpretation must be adopted  by us in the present case. We must not allow  ourselves to be unduly obsessed by the meaning of  "landlord" given in the definition or by its ordinary  etymological meaning but we must examine the  scheme of the relevant provisions of the statute,  the contextual setting in which Section 4, sub- section (1) occurs and the object which the  legislation is intended to achieve, in order to  determine what is the sense in which the word  "landlord" is used in Section 4, sub-section (1) \027  whether it is intended to include contractual  landlord."

         No such anomaly arises in the instant case.   

       To the similar effect is the decision of this Court in Whirlpool  Corporation v. Registrar of Trade Marks, Mumbai and Others [(1998) 8 SCC  1] wherein it was stated:

"Now, the principle is that all statutory definitions  have to be read subject to the qualification  variously expressed in the definition clauses which  created them and it may be that even where the  definition is exhaustive inasmuch as the word  defined is said to mean a certain thing, it is  possible for the word to have a somewhat different  meaning in different sections of the Act depending  upon the subject or context. That is why all  definitions in statutes generally begin with the  qualifying words, similar to the words used in the  present case, namely "unless there is anything  repugnant in the subject or context". Thus there  may be sections in the Act where the meaning may  have to be departed from on account of the subject  or context in which the word had been used and  that will be giving effect to the opening sentence in  the definition section, namely "unless there is  anything repugnant in the subject or context". In  view of this qualification, the court has not only to  look at the words but also to look at the context,  the collocation and the object of such words  relating to such matter and interpret the meaning  intended to be conveyed by the use of the words  "under those circumstances"."   

       There exists a distinction between an appeal and an application.   Whereas Section 31(4) of the 1940 Act or Section 42 of the 1996 Act  provides for an application, Sub-section (2) of Section 37 of the 1996 Act  provides for a statutory appeal.  A forum of an appellate court must be  determined with reference to the definition thereof contained in the 1996  Act.   

       We, therefore, see no reason to differ with the High Court.  The

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appeal is dismissed.  No costs.