Union of India (UOI) and Others vs Pawan and Co.

K.C. Puri, J.—M/s. Pawan and Co., filed an application u/s 11(6) and 11(8) of the Arbitration and Conciliation Act, 1996 (hereinafter to be referred to as ''the Act''), for appointment of an Arbitrator for adjudication of dispute pertaining to contract agreement No. 125-W/C/CDS dated 24.6.1998 for construction of proposed new building double storey and other ancillary works. It was pleaded in the application that contract agreement No. 125-W/C/CDS dated 24.6.1998 was entered into between the applicant and respondents and applicant completed the work to the entire satisfaction of the respondents. The work under the agreement was completed on 13.3.1999. However, the department did not make payment for certain items for work, carried out by the applicant and further certain items of work were wrongly priced. The claims mentioned in para No. 2 of the application were raised. It is further pleaded that contract agreement include an arbitration clause vide condition 64 of the General conditions of Contract wherein it is mentioned that all disputes shall be referred to the Arbitrator. So, in pursuant to that Clause, request was made for appointment of the Arbitrator.

The Union of India raised preliminary objections that present application is not maintainable, in as much as, there is no privity of contract between the applicant and the respondents. M/s. Pawan and Co., a proprietorship concern through its proprietor Pawan Kumar has filed the application, whereas the contract was with the partnership firm M/s Pawan and Co. That objection was disallowed vide impugned order Annexure P-11, by the District Judge, vide order dated 16.5.2005. The said order has been challenged in the present revision petition.

Both the counsel for the parties have relied upon the authority reported as S.B.P. and Co. Vs. Patel Engineering Ltd. and Another, , wherein the Constitution Bench of seven Judges, in para 46 of the judgment sum up the matter as under:

We, therefore, sum up our conclusions as follows:

i) The power exercised by the Chief Justice of the High Court or the Chief Justice of India u/s 11(6) of the Act is not an administrative power. It is a judicial power.

ii) The power u/s 11(6) of the Act, in its entirety, could be delegated, by the Chief Justice of the High Court only to another Judge of that court and by the Chief Justice of India to another Judge of the Supreme Court.

iii) In case of designation of a judge of the High Court or of the Supreme Court, the power that is exercised by the designated, judge would be that of the Chief Justice as conferred by the statute.

iv) The Chief Justice or the designated judge will have the right to decide the preliminary aspects as indicated in the earlier part of this judgment. These will be, his own jurisdiction, to entertain the request, the existence of a valid arbitration agreement, the existence or otherwise of a live claim, the existence of the condition for the exercise of his power and on the qualifications of the arbitrator or arbitrators. The Chief Justice or the Judge designated would be entitled to seek the opinion of an institution in the matter of nominating an arbitrator qualified in terms of Section 11(8) of the Act if the need arises but the order appointing the arbitrator could only be that of the Chief Justice or the Judge designate.

v) Designation of a district judge as the authority u/s 11(6) of the Act by the Chief Justice of the High Court is not warranted on the scheme of the Act.

vi) Once the matter reaches the arbitral tribunal or the sole arbitrator, the High Court would not interfere with order passed by the arbitrator or the arbitral tribunal during the course of the arbitration proceedings and the parties could approach the court only in terms of Section 37 of the Act or in terms of Section 34 of the Act.

vii) Since an order passed by the Chief Justice of the High Court or by the designated Judge of that court is a judicial order, an appeal will lie against that order only under Article 136 of the Constitution of India to the Supreme Court.

viii) There can be no appeal against an order of the Chief Justice of India or a judge of the Supreme Court designated by him while entertaining an application u/s 11(6) of the Act.

ix) In a case where an arbitral tribunal has been constituted by the parties without having recourse to Section 11(6) of the Act, the arbitral tribunal will have the jurisdiction to decide all matters as contemplated by Section 16 of the Act.

x) Since all were guided by the decision of this Court in Konkan Railway Corporation Ltd. and Another Vs. Rani Construction Pvt. Ltd., and orders u/s 11(6) of the Act have been made based on the position adopted in that decision, we clarify that appointments of arbitrators or arbitral tribunal thus far made, are to be treated as valid, all objections being left to be decided u/s 16 of the Act. As and from this date, the position as adopted in this judgment will govern even pending applications u/s 11(6) of the Act.

xi) Where District Judges had been designated by the Chief Justice of the High Court u/s 11(6) of the Act, the appointment orders thus far made by them will be treated as valid: but applications if any pending before them as on this date will stand transferred , to be dealt with by the Chief Justice of the concerned High Court or a Judge of that court designated by the Chief Justice.

xii) The decision in Konkan Railway Corporation Ltd. and Another Vs. Rani Construction Pvt. Ltd., is overruled.

Counsel for both the parties have stated at the Bar that the application u/s 11(6) of the Act can only be adjudicated by the Hon''ble Chief Justice of the High Court and all the pending matter stand transferred to the Hon''ble Chief Justice, in view of clause xi) mentioned above.

Counsel for both the parties have also stated at the Bar that point in controversy whether sole proprietor can file an application u/s 11(6) of the Act, be also left open to be determined by the Hon''ble Chief Justice, as all the matter stand transferred to Hon''ble the Chief Justice.

So, in view of the statement of the counsel for the parties, the impugned order stands set aside and the case be transferred to the Hon''ble Chief Justice, Punjab and Haryana High Court and point in controversy stand left open to be determined by the Hon''ble Chief Justice.

The District Judge shall transfer the case to the Hon''ble Chief Justice, after intimation to both the parties.