V. Laxmikant and Co. vs State of Gujarat

C.K. Thakkar, Actg. C.J.

All these appeals arise out of a common judgement and order passed by the learned Single Judge on 1st May, 1998. The appellants were the

original petitioners. They filed the above petitions and prayed for an appropriate writ, direction or order, quashing and setting aside the order dated

9th July, 1997 passed by a Tribunal constituted under the Gujarat Public Works Contract Disputes Arbitration Tribunal Act, 1992 (hereinafter

referred to as ""the Act of 1992) on an application Ex. 5 in TAR No. 310 of 1996 and in companion matters. By the said order, a preliminary

contention raised on behalf of the present appellants was negatived. The contention of the learned counsel for the appellants before the Tribunal

was that the proceedings before Arbitrator were over and hence they could not have been transferred to the Tribunal in view of the provisions of

Section 21 of the Act of 1992.

Before the learned Single Judge, it was argued that the provisions of Sections 12 and 21 of the Act of 1992 must be construed in their proper

perspective and conjoint reading of both the sections make it abundently clear that the proceedings in which Award or interim Award was made

by the Tribunal under the Arbitration Act, 1940 (hereinafter referred to as ''the Act of 1940 ), will not be affected and cannot be transferred.

Sections 12 and 21 of the Act of 1992 read as under :-

Section : 12 :

Revision :- (1) The High Court may, suo moto at any time or on an application made to it within three months from the date on which the award

or interim award is made or reviewed under this Act, by any party aggrieved by the award or interim award so made or reviewed, call for the

record of any case in which an award or interim award has been made or, as the case may be reviewed and if the Tribunal appears -

(a) to have exercised a jurisdiction not vested in it by law, or

(b) to have failed to exercise of its jurisdiction illegally or with material irregularity.

the High Court may make such order in the case as it thinks fit.

(2) For the purpose of exercising its powers or revision under this section, the High Court shall have the same powers as it has, and as far as may

be, follow the same procedure as it follows, under the CPC 1908 while exercising its powers of revision u/s 115 of the Code, and for that purpose

the Tribunal shall be deemed to be a Court subordinate to it.

Section 21 :-

Arbitration Act to cease to apply :- The provisions of the Arbitration Act, shall in so far as they are inconsistent with the provisions of this Act,

cease to apply to any dispute arising to such dispute before an arbitrator, umpire, Court authority shall stand transferred to the Tribunal.

The learned Single Judge, after considering the submissions made on behalf of the petitioners-appellants and interpreting the provisions of

Section 21 of 1992 Act in the light of a decision of the Division Bench in State of Gujarat and Another Vs. Rajesh Builders, , held that the

proceedings could not be said to be over. In Rajesh Builders (supra), the Division Bench held that even in those cases, where an award was

passed by an Arbitrator under 1940 Act, could be said to be pending unless and until the said award has been made rule of the Court. Since the

proceedings could be said to be pending proceedings, the provisions of Section 21 of the Act of 1992 would be attracted and no illegality can be

said to have been committed by transferring such proceedings to the Tribunal. It is this order, which is challenged in the present group of Letters

Patent Appeals.

It appears that on September 21,1999, leave to amend was sought. In the amendment, a contention was raised regarding constitutional validity

and vires of Section 21 of 1992 Act as violative of Article 14 of the Constitution of India being arbitrary and unreasonable. The said amendment

was granted which read as under :-

XXB : If Section 21 has to be saved from invalidity and unconstitutionality, it has to be read down as not affected the awards already passed, i.e.

prior to 1.1.1994 and all those arbitration proceedings which are not inconsistent with the provisions of the Tribunal Act.

A prayer was, therefore, made to issue a writ declaring Section 21 of the Act of 1992 ultra vires and unconstitutional insofar as it purports to nullify

the awards made and published before coming into the operation of the 1992 Act.

At the hearing, Mr. Dayani, learned counsel appearing for the appellants contended that the provisions of 1940 Act and the provisions of 1992

Act should be read harmoniously . Drawing our attention to various provisions of 1940 Act, he submitted that there are certain sections in the Act

of 1940 which can be invoked to proceedings prior to culmination of an award by an Arbitrator. In this connection, reference was made to

Sections 5, 8, 9, 10, 11, 12, 18, 19, 27, 28, 34, 36, 38 and 31. There are however, other sections, which apply to post-arbitral award

proceedings, i.e., Sections 14, 15, 16, 17, 30, and 33 more particularly (2nd part thereof). According to the counsel, to the cases covered by the

second part, the provisions of Section 21 of 1992 Act would not apply as the proceedings cannot be said to be pending. He, therefore, submitted

that an error apparent on the face of the record is committed in transferring the matters to the Tribunal. He further submitted that if such an action is

held permissible u/s 21 of the Act, the said section must be declared as arbitrary, unreasonable and violative of Articles 14 and 19 of the

Constitution of India as it interferes with accrued rights. He also submitted that before the learned Single Judge, that question was not raised and

when amendment was granted by this Court and the question of validity of Section 21 is challenged, the matter requires consideration. He,

therefore, prayed that the matters may be admitted.

It was, however, stated by learned AGP that alongwith Special Civil Applications, a Revision Application was also filed by the petitioner being

Civil Revision Application No. 2283 of 1995. In fact, the Judgement of the learned Single Judge was a common judgment disposing of three

Special Civil Applications and one Civil Revision Application. The learned AGP stated that against the order passed by the learned Single Judge in

Civil Revision Application, a Special Leave to Appeal (Civil) No. 14668 of 1998 was filed by the petitioner before the Hon''ble Supreme Court

and the same was rejected by the Hon''ble Apex Court agreeing with the view taken by the learned Single Judge of this Court.

Now, dealing with the contention of the learned counsel for the appellant on interpretation of Section 21, the learned Single Judge stated as

under :-

In order to appreciate the controversy, it would be appropriate to refer to same of the provision of the Act of 1940 and the Gujarat Act of 1992.

It is not in dispute that under the provisions of the Act of 1940 the award made by the arbitrator or umpire is required to be filed before the Civil

Court and the Court may make the award rule of the court after following necessary procedure provided under the Act of 1940. However, section

8 of the act of 1992 provides that where any dispute has arisen between the parties to the works contract, either party shall, irrespective of

whether such contract contains arbitration clause or not, refer to the matter within one year form the date when dispute arose. Subclause 5 of

clause 8 provides that the award including interim award subject to the provisions of Section 11 or 12 shall be final and binding on the parties to

the dispute. Sub-section 6 makes such an award a decree within the meaning of section 2 of the Code of Civil Procedure. Thus, it becomes

evident that under the Gujarat Act of 1992, irrespective of existence of arbitration clause all disputes pertaining to the works contract in which a

state or undertaking is a party is compulsory and of statutory nature. In fact, section 13 ousts the jurisdiction of the Civil Court. Section 13

provides that no Civil Court will have jurisdiction to deal with or decide any question that the Tribunal is empowered to deal with and decide by or

under this Act and no injunction will be granted by any Civil Court in respect of any action taken or to be taken in pursuance of the power by or

under the Act. Section 21 provides that at the commencement of the Act of 1992, the provisions of the Arbitration Act of 1940 shall so far as they

are inconsistent with the provisions of Gujarat Act of 1972 cease any dispute arising from a works contract and all arbitration proceedings in such

dispute before an arbitrator, umpire, court of authority shall stand transferred to the Tribunal. Section 21 of the Act reads as follows :-

Arbitration act to cease to apply The provisions of the Arbitration shall in so far as they are inconsistent with the provisions of this Act, Cease

any dispute arising form a work contract and all arbitration proceedings in such dispute before an arbitrator, umpire, court or authority shall stand

transferred to the Tribunal.

On a conjoint reading of both the Acts the inconsistency is apparent as already started in the Gujarat Act of 1992. The arbitration in the matter of

works where the State or a Public undertaking is a party and compulsory and statues. The award is not required to be made rule of the court, but

the award made by the Tribunal is deemed to be a decree within the meaning of Section 2 of the Code of Civil Procedure. In view of this, in my

view, there is no substance in the contention raised by Shri Dayani, learned counsel.

The Hon''ble Apex Court agreed with the reasons recorded and conclusions arrived at by the learned Single Judge by observing as under :-

In the present case, the arbitration proceedings in relation to the disputes were pending before the Court and hence the High Court has rightly

transferred these proceedings to the Tribunal. u/s 8 of the said Act on reference to the Tribunal, the Tribunal has to make an award which shall be

deemed to be a decree within the meaning of Section 2 of Civil Procedure Code, 1908 and it shall be executed accordingly.

We therefore, agree with the reasoning and conclusion of the High Court. The SLP is dismissed.

From the above discussion, it is clear that according to the learned Single Judge, even if the Award was passed by Tribunal under 1940 Act, till

such an Award became rule of the court or decree, the proceedings could be said to be pending. In this connection, the learned Single Judge relied

upon on Section 8 of 1992 Act, which reads as under :-

(1) Reference to Tribunal and making of Award :- (1) Where any dispute between the parties to the works contract, either party shall, irrespective

of whether such works contract contains an arbitration clause or not, refer, within one year from the date when the dispute has arisen, such dispute

in writing to the Tribunal for arbitration in such from and accompanied by such documents or other evidence and by such fees, as may be

prescribed.

(2) On receipt of a reference under sub-sec. (1), the Tribunal may, if satisfied after such inquiry as it may deem fit to make, that the requirements

under this Act in relation to the reference are complied with, admit such reference and where the Tribunal is not so satisfied, it may reject the

reference summarily.

(3) Where the Tribunal admits the reference under Sub-sec. (2), it shall, after recording evidence if necessary, and after perusal of the material on

record and on affording an opportunity to the parties to submit their arguments, make an award or an interim award, giving its reasons therefore.

(4) The Tribunal shall use all reasonable dispatch in entering on and proceeding with the reference admitted by it and making the award, and an

endeavour shall be made to make an award within four months from the date on which the Tribunal had admitted the reference.

(5) The award including the interim award made by the Tribunal shall, subject to an order, if any, made u/s 11 or 12 be final and binding on the

parties to the dispute.

(6) An award including an interim award as confirmed or varied by an order, if any, made u/s 11 and 12 shall be deemed to be a decree within the

meaning of Section 2 of the Code of Civil Procedure, 1908 of the principal Court of original jurisdiction within the local limits whereof the award

or the interim award has been made and shall be executed accordingly.

Sub-sections (5) and (6) of Section 8 of 1992 Act, thus, clarify that an Award including an interim award made by the Tribunal shall be

deemed to be decree within the meaning of Section 2 of the CPC 1908 subject to appeals, etc. The Hon''ble Supreme Court observed that by

holding that the proceedings before the Arbitrator were pending, and by transferring them to the Tribunal, the High Court had not committed an

error of law. Thus, according to the Hon''ble Apex Court, the proceedings could be said to be pending and the Tribunal had to make an award in

accordance with law. If, it is so, obviously, there is no illegality in transferring the proceedings to the Tribunal. In the circumstances, the

proceedings ware rightly transferred to the Tribunal.

It was submitted by the learned counsel for the appellants that the provisions of the 1940 Act would not apply only when they are inconsistent

with the provisions of the 1992 Act and not otherwise. In our opinion, the question before us is not of inconsistency between two Acts, but of vires

and validity of the Act. Since the proceedings were pending, they were rightly transferred to the Tribunal. As the proceedings could be transferred

to the Tribunal, the action can not be said to be illegal. The provisions of Section 21 of 1992 Act also, in these circumstances, can not be declared

ultra vires or un-Constitutional.

For the foregoing reasons, we do not see any substance in these appeals. They are disposed of accordingly. Notice is discharged in all the matters.

No order as to costs.