State of Punjab and Others vs M/s. Natha Singh

Rajan Gupta, J.—Present revision petition is directed against the order 17.04.2002 passed by Additional Civil Judge (Senior Division), Ropar, whereby he invoked Sections 7 and 8 of the Arbitration and Conciliation Act, 1996 (for brevity, ''the Act'') and appointed Superintending Engineer as arbitrator in the matter. Learned State counsel has assailed the order. According to her, no suit was pending before the court below at the time an application under Sections 7 and 8 of the Act was moved. According to her, the court acted beyond its jurisdiction in entertaining the petition and appointing the arbitrator.

The plea has been opposed by learned counsel for the respondent.

Heard learned counsel for the parties and record perused.

It appears that the petitioner-State of Punjab entered into a contract for the construction of the SYL Canal V.R. Bridge RD 73.396/71.189 and executed an agreement in that respect. A dispute having arisen between the parties during the course of execution of work, the same was referred by the respondent to the Executive Engineer, SYL Canal Project. The Executive Engineer, however, rejected the claim of the respondent. As a result an appeal was preferred under Clause 62 before the Superintending Engineer but the same was dismissed. Respondent, thereafter, wrote a letter to the Chief Engineer to the effect that a panel of officers be constituted for deciding the dispute. Having failed before the authorities, respondent invoked the jurisdiction of the trial court under Sections 7 and 8 of the Act. The court below after considering the issue decided to appoint an arbitrator. Accordingly, Sh. T.L. Banga, Superintending Engineer, Dolba Dam Circle, Hoshiarpur was appointed as arbitrator. He was directed to submit the award within four months. Aggrieved, present revision petition has been preferred by the State before this court.

The main contention before this court is that unless any proceedings are pending before the court, a petition u/s 8 would not be maintainable.

Section 8 of the Act reads as follows:-

Power to refer parties to arbitration where there is an arbitration agreement:

(1) A judicial authority before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party so applies not later than when submitting his first statement on the substance of the dispute, refer the parties to arbitration.

(2) The application referred to in sub-section (1) shall not be entertained unless it is accompanied by the original arbitration agreement or a duly certified copy thereof.

(3) Notwithstanding that an application has been made under sub-section (1) and that the issue is pending before the judicial authority, an arbitration may be commenced or continued an arbitral award made.

It is evident that sub-clause 1 of section 8 provides that in case some action is brought before the court which is subject of arbitration agreement, a party may apply for reference of the matter to arbitration at the initial stage itself. There is nothing in the provision to suggest that petition can be directly moved before the court u/s 8. Only, if some proceedings is initiated by either party, application u/s 8 would be maintainable. In such circumstances, court would be at liberty to refer the matter to arbitration.

In the instant case, however, petition u/s 8 of the Act has been directly entertained by the court which is not permissible. In division bench judgment of Karnataka high court reported as NEPC-MICON Limited, Chennai Vs. Perfect Engineering (Mysore) Works, Mysore and Another, , it has been held as follows:-

A plain reading of Section 8 of the 1996 Act and the law declared by the Supreme Court, it is clear that the Court can refer the parties to arbitration only if there is an action pending before it and any of the parties to the suit brings it to the notice of the Court that the dispute is subject to an arbitration agreement. In the present case admittedly no suit or action regarding subject-matter of the arbitration agreement was pending before the Court below. Therefore, the Prl. District Judge was not competent to entertain any petition for appointment of an arbitrator and consequently for referring the dispute to him for arbitration.

In my considered view ratio of aforesaid judgment is fully applicable to this case. Under the circumstances, order under challenge is hereby set-aside. Revision petition is allowed in these terms.