Sri M.S. Rao vs The Vice Chancellor, Mangalore University and Another

Tirath S. Thakur, J.—This appeal arising out of an order dated 30.11.1998 made by the District Judge, Dakshina Kannada at Mangalore dismissing an application for appointment of an Arbitrator and for grant of interim directions in terms of Sections 8 and 9 of the Arbitration and Conciliation Act, 1996 has been heard for final disposal with consent of the learned Counsel for the parties. The controversy arises in the following circumstances:

The Petitioner claims to be a registered Civil Contractor. He appears to have been entrusted with the construction of what is known as ''Yakshagana Kalaranga'' in Mangalore by the Respondent-Mangalore University. Some time after the allotment of the work, the contract was terminated, apparently because according to the Respondent, the appellant had committed violations of the terms of the contract and entered into between them. Aggrieved by the said termination, the appellant appears to have called upon the University to nominate an Arbitrator for adjudication of the disputes that had arisen between them. Having evoked no response to the said request, the appellant moved a Petition u/s 8 of the Arbitration and Conciliation Act, 1996 before the District Judge, Dakshina Kannada at Mangalore seeking a direction for appointment of an Arbitrator to adjudicate upon the disputes. Simultaneously, an application purporting to be under Sections 9 and 17 of the Arbitration and Conciliation Act, 1996 was moved before the said Court for stay of the order rescinding the contract allotted in his favour. Both these applications have been dismissed by the Court below in terms of the impugned order. The Court was of the view that the petition filed by the appellant u/s 8 of the Act was not maintainable as no action was pending before the Court in relation to any matter, which was the subject matter of an arbitration agreement. The Court also held that since the main petition i.e., the one filed u/s 8 of the Act was not maintainable, the question of issuing any interim directions in terms of Section 9 of the Act would not arise.

Counsel appearing for the appellant argued that the petition filed for appointment of an Arbitrator in terms of the agreement between the parties, ought to have been treated as one u/s 8 of the Arbitration Act of 1940 and not the Arbitration and Conciliation Act of 1996. Alternatively he submitted that even if a Petition u/s 8 of the new Act was not maintainable, the Court below ought to have considered the prayer for interim directions in terms of Section 9 of the said latter Act independent of any proceedings u/s 8 thereof.

Counsel appearing for the Respondent-University on the other hand argued that no arbitration agreement existed between the parties to justify appointment of an arbitrator or making of any reference to him. He contended that the termination of the contract was followed by allotment to another contractor, who has already completed the work. The question of issuing any interim directions in terms of Section 9 of the Arbitration and Conciliation Act of 1996 did not therefore arise. He urged that any request for appointment of an Arbitrator could in any case be maintained only before the Hon''ble Chief Justice or a Judge designated by him in terms of Section 11 of the 1996 Act.

The petition filed by the appellant before the Court below was u/s 8 of the 1996 Act. The question of treating the same as one filed under the old did not arise.

Section 8 of the Arbitration and Conciliation Act, 1996, envisages a reference by any judicial authority, before whom any action is brought in a matter, which is the subject of an arbitration agreement. The said provision empowers the Court to direct the parties to a pending action to refer the dispute to arbitration if a request to that effect is made before the filing of the written statement. That provision is somewhat similar to Section 34 of the Arbitration Act of 1940. The condition precedent for any party to invoke the powers of the Court u/s 8 is the pendency of a civil action before it in regard to a matter covered by the arbitration agreement between the parties. In the instant case, it is not denied that no suit or other proceeding was pending or brought before the District Judge, Mangalore in which the said Court could have possibly made a reference within the meaning of Section 8. The Court below was therefore justified in holding that a Petition u/s 8 for appointment of an Arbitrator and reference of any dispute to him was, independent of any civil action pending before such Court, not maintainable. The appellant could have, if so advised, invoked Section 11 of the Arbitration and Conciliation Act, 1996, which envisages nomination of an Arbitrator by the Chief Justice or any person or Institution designated by him in cases, where an arbitration agreement between the parties envisages reference to Arbitrators. A plain reading of the said provision leaves no manner of doubt that in a case where the arbitration agreement envisages reference to a sole arbitrator, the failure of a party to agree to an appointment entitles the party demanding the reference to approach the Chief Justice for a proper reference. In the very nature of the power exercisable by the Chief Justice or his nominee u/s 11, the question whether or not an arbitration agreement is in existence, shall have to be considered by the Authority examining the request for appointment. The appellant has not admittedly approached the competent authority u/s 11 for the reference so far. The dismissal of his Petition u/s 8 by the Trial Court as also the present appeal shall not however prevent him from making a proper request to either the Hon''ble Chief Justice or the authority designated by his lordship for a proper reference, in which event it shall be open to the Respondent-University to argue that there does not in fact exist any arbitration clause between the parties to warrant such a reference.

That leaves us with the question whether the interim application made by the Petitioners for the grant of direction staying the termination of the contract and encashment of the Bank Guarantee was or was not maintainable. The Trial Court appears to have proceeded on the assumption that the application under Sections 9 and 17 of the Arbitration and Conciliation Act, 1996 was an interim measure in the main petition u/s 8 of the said Act. Since the main Petition u/s 8 was held to be not maintainable, the applications made under Sections 9 and 17 were also dismissed on that ground alone. That was not in our opinion the correct legal position. It is no doubt true that the applications under Sections 9 and 17 of the Act were described as an interim application apparently on the basis that the appellant was one u/s 8, yet we find it difficult to subscribe to the view that an application under Sections 9 and 17 could not have been maintained independently. A bare reading of Section 9 of the Act would show that any party to an arbitration agreement can before or during arbitration proceedings or at any time after the making of the arbitral award, but before its enforcement apply to a Court for any one or more of the directions envisaged therein. The nature of the power reserved with of the Court u/s 9 is such as can be invoked by a party before, during or after the making of the arbitral award. The expression Court as defined in Section 2(o) of the Act is the Principal Civil Court of original jurisdiction in a District including the High Court in exercise of its ordinary civil jurisdiction where such jurisdiction is exercisable. The Court below was in that view not justified in rejecting the application u/s 9 for interim directions merely because the Petition u/s 8 of the Arbitration Act was not maintainable. That does not however materially alter the position in the instant case. The reason is that after the termination of the appellant''s contract the work in question was allotted to another contractor who has since completed the work. In so far as the encashment of the bank guarantees are concerned, there is nothing on record before us to show that the Bank Guarantees have not been encashed. In the circumstances, the question of remanding the matter back to the District Court for considering the prayers u/s 9 over again will serve no purpose. All that need be said is that if any occasion continues for the appellant to seek any directions in terms of Section 9, the making of the impugned order or the dismissal of this Appeal, will not prevent him from doing so.

In the result, this Appeal fails and is hereby dismissed, but in the circumstances without any orders as to costs.