IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
LETTERS PATENT APPEAL No. 182 of 2006
In
SPECIAL CIVIL APPLICATION No. 400 of 2002
For Approval and Signature:
HONOURABLE MR.JUSTICE RAVI R.TRIPATHI
HONOURABLE MR.JUSTICE N.V. ANJARIA
========================================================= 1 Whether Reporters of Local Papers may be allowed to see the judgment ?
2 To be referred to the Reporter or not ?
3 Whether their Lordships wish to see the fair copy of the judgment ?
4 Whether this case involves a substantial question of law as to the interpretation of the constitution of India, 1950 or any order made thereunder ?
5 Whether it is to be circulated to the civil judge ?
=========================================================
EXECUTIVE ENGINEER SARDAR SAROVAR NARMADA NIGAM -
Appellant(s) Versus
BHAVEN CONSTRUCTION & 1 - Respondent(s)
========================================================= Appearance :
MR KAMAL TRIVEDI, ADVOCATE GENERAL assisted by MR GC MAZMUDAR for Appellant(s) : 1,MR HG MAZMUDAR for Appellant(s) : 1, MR BS PATEL for Respondent(s) : 1, MRS RANJAN B PATEL for Respondent(s) : 1, RULE SERVED for Respondent(s) : 2, =========================================================
CORAM : HONOURABLE MR.JUSTICE RAVI R.TRIPATHI
and
HONOURABLE MR.JUSTICE N.V. ANJARIA
Date : 17/09/2012
ORAL JUDGMENT
(Per : HONOURABLE MR.JUSTICE RAVI R.TRIPATHI)
1. The present appeal is filed by the Executive Engineer, Sardar Sarovar Narmada Nigam Ltd. (“SSNNL” for short), who was the petitioner before this Court in Special Civil Application No.400 of 2002, which came to be dismissed by the learned Single Judge by judgment and order dated 29.12.2005.
2. To have the idea of the controversy involved in the matter, it is necessary to set out the following facts.
2.1 Special Civil Application No.400 of 2002 was filed by the present appellant-original petitioner (hereinafter referred to as “the petitioner”) challenging the order passed by the sole Arbitrator appointed by opponent No.1 herein-Bhaven Construction (hereinafter referred to as “the respondent”) unilaterally despite the fact that a letter was written by the petitioner as early as on 23.11.1998 (Annexure-B to the petition). The sole Arbitrator passed an order on 20.10.2001 on an application submitted by the petitioner and held that, 'he has the jurisdiction to adjudicate claim submitted by the respondent herein'. The petitioner herein awarded a contract to the respondent for 'manufacturing and supplying' of bricks of size 223 mm x 112.5 mm x 70 mm for Brick Lining Works of distributors and Minors in the Command Area of Narmada Main Canal Km. 0.00 to 144.00 i.e. between River Narmada and Mahi (Block No.4A, 4B, 5 & 8). There arose a dispute between the parties. The respondent, after receiving the payment, served the petitioner with notice dated 13.11.1998, a copy of which is found at Annexure-A to the petition. The relevant part of the notice reads as under:-
“We say that, as the disputes and differences have arisen by and between the parties and accordingly, the matter is required now to be resolved through arbitration and therefore, we request your goodself to send the list of three persons from which, we will select one person so as to act as a Sole Arbitrator”.
2.2 This notice was replied by the petitioner (SSNNL) by a letter referred to hereinabove (dated 23.11.1998). It was specifically mentioned in the said letter that:-
“As mentioned in the clause-38 Arbitration shall be conducted in accorded with the provision of Indian Arbitration Act, 1940 and any statutory modification there off”. It was also mentioned in the said reply that,“ (emphasis supplied) It was also mentioned therein that:-
“Therefore as per Govt. of Gujarat has passed the Gujarat Public Work Contract dispute Arbitration Tribunal Act, 1992. The tribunal constituted under the same act us working at Ahmedabad for all disputes and differences with State Government all the undertakings belonging to Gujarat are adjudicated and settled by the said Tribunal.”
2.3 With a view to bring on record the method and manner in which the respondent was conducting itself, the contents of para 1 of the reply are reproduced hereunder:-
“In connection to your letter Dt. 11-11-98, it has been stated by you that you have requested vide letter Dt. 6-10-98 to take decision based on your letter Dt. 27-7-98. In fact, the letter addressed to the Chief Engineer and copy endorsed to Division Office till today. This has been replied to Chief Engineer through Superintending Engineer as desired regarding letter 6-10-98. As you have tried to misguide higher official regarding the facts replied vide this office letter Dt. 28-8-98. Thus, there is no question taking decision by division office.”
2.4 Vide letter dated 29.12.1998, the respondent was conveyed by reiterating that:-
“..... it is to state that as per clause no.38 of contract arbitration shall be conducted with provisions of Indian Arbitration Act, 1940 or any statutory modification there off.
Therefore, as Govt. of Gujarat has passed the Guj. Public Works Contract Dispute Arbitration Tribunal Act, 1992, your proposal to proceed further in accordance with clause-38 of the contract agreement is not accepted.”
2.5 One thing which clearly emerges from the aforesaid correspondences between that parties is that for the reasons best known to the respondent, the respondent was keen on appointing 'sole Arbitrator', rather than going to the “Tribunal”, though as per the petitioner (SSNNL), in view of 'the Gujarat Public Works Contract Disputes Arbitration Tribunal Act, 1992', which was accorded assent by the President of India on 23.03.1992, the provisions of the 1992 Act were to prevail and govern the field and not the Arbitration and Conciliation Act of 1996. The respondent, acting in a hot haste, tried to see that the 'petitioner is non- suited'. The respondent is now contending that the order passed by the sole Arbitrator dated 20.10.2001 is passed under Section 16 of the Arbitration and Conciliation Act, 1996 and therefore, the only remedy available to the petitioner is to wait till the arbitral award is passed by the sole Arbitrator appointed by him unilaterally and thereafter to challenge the said award under Section 34 of the Arbitration and Conciliation Act, 1996.
2.6 This Court cannot lose sight of the fact that it was right from beginning the case of the petitioner that, “in view of the contents of contract wherein it is stated that, 'As mentioned in in the clause-38 Arbitration shall be conducted in accorded with the provision of Indian Arbitration Act, 1940 and any statutory modification there off', after passing of the Gujarat Public Works Contract Dispute Arbitration Tribunal Act, 1992, which was necessarily a statutory modification of the provisions of the Indian Arbitration Act, 1940, the Tribunal under the 1992 Act has the jurisdiction”. The petitioner (SSNNL) was therefore asking for the adjudication of the disputes between the parties by the Tribunal under the 1992 Act. The insistence on the part of the respondent to appoint a 'sole Arbitrator' and getting the disputes adjudicated at his hand is not understandable. (emphasis supplied).
3. Learned Advocate General Mr.Kamal Trivedi for the petitioner (SSNNL) candidly submitted that the petitioner was ill-advised at one stage, which resulted into filing of a suit, wherein interim relief was not granted, against which an appeal was filed which too was dismissed, but then mistake was corrected and it was decided to pursue the present course of action. Now order dated 20.10.2001 is challenged by filing Special Civil Application No.400 of 2002, praying that:-
“14) (B) The Hon'ble Court be pleased to issue an appropriate writ, Order or direction quashing and setting aside the proceedings initiated by the respondent no.1, appointment of the arbitrator respondent no.2, and the order passed by the respondent no.2 on 20/10/2001, a copy of which is marked as ANNEXURE-I.
(C) The Hon'ble Court be pleased to pass an order that the proceedings initiated by the respondent no.1, and the appointment of the respondent no.2 as arbitrator, and the further proceedings by the respondent no.2, are invalid and illegal and also against the provisions of THE GUJARAT PUBLIC WORKS CONTRACTS DISPUTES ARBITRATION TRIBUNAL ACT, 1992.”
3.1 The matter was strenuously contested by the respondent. After considering the rival submissions of both the sides, the learned Single Judge is pleased to dismiss the petition. The learned Advocate General submitted that the learned Single Judge has committed an error in appreciating the nature of the controversy involved in the matter. Learned Advocate General submitted that the controversy involved in the matter was, 'whether in light of the contents of Clause-38 of the contract, which provided for arbitration in accordance with the provisions of the Indian Arbitration Act, 1940 or any statutory modification thereof, it was open for the respondent to appoint a sole Arbitrator unilaterally and thus non-suiting the petitioner'. The case of the petitioner right from the beginning was that the matter is required to be adjudicated by the 'Arbitration Tribunal' (under 1992 Act). Learned Advocate General submitted that the learned Single Judge, referring to the decision of the Hon'ble the Apex Court in the matter of SBP & Co. Vs. Patel Engineering Ltd. & Anr., reported in (2005) 8 SCC 618, erred on observing that:-
“At this stage, it is required to be noted that the appointment of respondent No.2 as arbitral tribunal has been constituted without having recourse to Section 11(6) of the Arbitration Act, 1996 and as per the latest judgment of the Hon'ble Supreme Court in the case of SBP & Co. (supra) 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 the matters as contemplated by Section 16 of the Act.”
Learned Advocate General submitted that the learned Single Judge further erred in observing that:-
“As held by the Hon'ble Supreme Court in the said judgment once the matter reaches the arbitral Tribunal or the Sole Arbitrator, the High Court would not interfere with orders passed by the Arbitrator or the Arbitral Tribunal during course of arbitration proceedings and parties could approach the court only in terms of Section 37 of the Act or in terms of Section 34 of the Act. ”
3.2 Learned Advocate General submitted that the reliance placed by the learned Single Judge on paras-44, 45 and 46 of the judgment of the Hon'ble the Apex Court in the matter of SBP & Co. (supra) is misplaced because the judgment of the Hon'ble the Apex Court was in different set of facts and the Hon'ble the Apex Court had altogether a different question, which does not arise in the present proceedings. In this regard, learned Advocate General invited the attention of the Court to para-2 of the said judgment [SBP & Co. (supra)], which reads as under:-
“2. What is the nature of the function of the Chief Justice or his designate under Section 11 of the Arbitration and Conciliation Act, 1996 is the question that is posed before us. The three judges bench decision in Konkan Rly. Corpn. Ltd. Vs. Mehul Construction Co. [(2000) 7 SCC 201] as approved by the Constitution Bench in Konkan Railway Corpn. Ltd. & anr. Vs. Rani Construction Pvt. Ltd. [(2002) 2 SCC 388] has taken the view that it is purely an administrative function, that it is neither judicial nor quasi-judicial and the Chief Justice or his nominee performing the function under Section 11(6) of the Act, cannot decide any contentious issue between the parties. The correctness of the said view is questioned in these appeals.”
(emphasis supplied)
3.3 Learned Advocate General then invited attention of the Court to various paras of the said judgment to bring home the fact that it is only when there is no dispute between the parties as to which law will govern the affairs of the parties that the aforesaid judgment provides necessary guidance and assistance to the parties, but when the question between the parties is 'whether the affairs of the parties (dispute) will be governed by the Gujarat Public Work Contract dispute Arbitration Tribunal Act, 1992 or the Arbitration and Conciliation Act, 1996' then the aforesaid judgment is not applicable and does not provide any guidance. Therefore, to that extent, when the learned Single Judge referred to and relied upon paras-44, 45 and 46 of the aforesaid judgment, it was an error and the judgment and order of the learned Single Judge is required to be quashed and set aside. He further submitted that the order dated 20.10.2001 is also required to be quashed and set aside and the matter be sent to the Tribunal established under the Gujarat Public Works Contract disputes Arbitration Tribunal Act, 1992.
3.4 Learned Advocate General fairly stated that firstly as the matter was pending before this Court, there will be no question of delay and even otherwise on instructions from the petitioner, he is authorized to make a statement that, “the petitioner will not raise a plea of 'delay' before the Tribunal”.
3.5 Learned Advocate General invited attention of the Court to various provisions of the Gujarat Public Works Contract disputes Arbitration Tribunal Act, 1992 to bring home the fact that the said law will be applicable to the case on hand and the Arbitration and Conciliation Act, 1996 will not be applicable. Learned Advocate General invited attention of the Court to Section 2(1) (a), 2(1)(k), Sections 8, 12, 13 and also Section 21. Section 21 reads as under:-
“21. 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 from a works contract and all arbitration proceedings in relation to such dispute before an arbitrator, umpire, court or authority shall stand transferred to the Tribunal.”
(emphasis supplied) The 'Arbitration Act' in this Section means 'Indian Arbitration Act, 1940' as is mentioned in Clause-(a) of sub-section (1) of Section 2. Now by necessary implication, it will be 'Arbitration and Conciliation Act, 1996', as it is holding the field after its enactment.
3.6 Learned Advocate General submitted that if what is contended by the respondent herein is accepted, that will render the Gujarat Public Work Contract Dispute Arbitration Tribunal Act, 1992 nugatory and the same will also be contrary to the pronouncements of the Hon'ble the Apex Court in this regard. Learned Advocate General invited attention of the Court to a decision of the Hon'ble the Apex Court in the matter of Madhya Pradesh Rural Road Development Authority & Anr. Vs. L.G.Chaudhary Engineers and Contractors, reported in (2012) 3 SCC 495. Learned Advocate General submitted that in Madhya Pradesh, a similar Act like 1992 Act of the State of Gujarat is in force. A question which arose before the Hon'ble the Apex Court for consideration in the aforesaid judgment is set out in opening para, which reads as under:-
“Leave granted. The question which falls for consideration in this appeal is whether the provision of Madhya Pradesh Madhyasthan Adhikaran Adhiniyam, 1983 (hereinafter, `M.P. Act') which statutorily provides for the parties to the Works Contract to refer all disputes to the Arbitration Tribunal constituted under Section 7 of the Act will continue to operate in view of the provisions of Arbitration and Conciliation Act, 1996 (hereinafter `A.C. Act 1996') which is a Central Act, subsequently enacted.”
(emphasis supplied)
3.7 Learned Advocate General submitted that it is this judgment which will have application to the facts of the case on hand because the controversy which arose before the Hon'ble the Apex Court is similar to the controversy involved here. He submitted that the only distinguishing feature is that in the case before the Hon'ble the Apex Court, the Arbitral Tribunal was appointed by the High Court, whereas in the case on hand, the sole Arbitrator is appointed by the respondent unilaterally. Learned Advocate General invited attention of the Court to paras-12 to 19 of the aforesaid judgment, to answer the contention raised by the respondent herein that, 'there is a judgment of the Hon'ble the Apex Court in the matter of Va Tech Escher Wyass Flovel Limited Vs. Madhya Pradesh State Electricity Board & Anr., reported in (2011) 13 SCC 261 and there the Hon'ble the Apex Court has answered the said contention negativing the same'. For ready perusal, para-14 of the judgment in the case of Madhya Pradesh Rural Road Development Authority (supra) is reproduced hereunder:-
“14. ..... We are of the opinion that the aforesaid decision is distinguishable because in the present case the arbitration clause itself mentions that the arbitration will be by the Madhya Pradesh Arbitration Tribunal. Hence, in this case arbitration has to be done by the Tribunal.”
(emphasis supplied)
3.8 Learned Advocate General invited attention of the Court to para-23 of the aforesaid judgment, wherein the Hon'ble the Apex Court did record a finding that, 'in view of various provisions of the M.P. Act, the “parties'” autonomy in the choice of Arbitral Tribunal is not there'.
3.9 Learned Advocate General then invited attention of the Court to para-24, which reads as under:-
“24. In State of Madhya Pradesh and another vs. Anshuman Shukla – (2008) 7 SCC 487, this Court while referring to the M.P. Act and dealing with the nature of the arbitral constituted under the said Act held that the said Act is a special Act and provides for compulsory arbitration. It provides for a reference and the tribunal has been given the power of rejecting the reference at the threshold.
It also held that the M.P.Act provides for a special limitation and fixes a time limit for passing an award. It has also been held that Section 14 of the M.P.Act provides that the award can be challenged under special circumstances and Section 17 provides for finality of the award, notwithstanding anything to the contrary contained in any other law relating to arbitration. All these features of the Act were pointed by this Court in Anshuman Shukla (supra) to show that there is inconsistency between the provisions of A.C. Act 1996 and those of the M.P. Act.”
(emphasis supplied)
3.10 Learned Advocate General submitted that same is the position with the Gujarat Act and therefore, this judgment is applicable to the facts of the case on hand. Learned Advocate General submitted that the Hon'ble the Apex Court has made it clear in para-26 as to why the earlier judgment of the Hon'ble the Apex Court in the matter of Va Tech (supra) will not be applicable. The Hon'ble the Apex Court observed:-
“26. ..... This Court while rendering the decision in Va Tech (supra) has not either noticed the previous decision of a co-ordinate Bench of this Court in Anshuman Shukla (supra) or the provisions of Section 2(4) of A.C. Act 1996. Therefore, we are constrained to hold that the decision of this Court in Va Tech (supra) was rendered per incuriam.”
(emphasis supplied)
3.11 Learned Advocate General submitted that incidentally, the facts which were before the Hon'ble the Apex Court in Madhya Pradesh Rural Road Development Authority (supra) are very close to the facts of the case on hand and this can be seen from the observations made by the Hon'ble the Apex Court in para-39. The said para-39 is reproduced hereunder for ready perusal:-
“39. The M.P. Act of 1983 was made when the previous Arbitration Act of 1940 was in the field. That Act of 1940 was a Central Law. Both the Acts operated in view of Section 46 of 1940 Act. The M.P. Act 1983 was reserved for the assent of the President and admittedly received the same on 17.10.1983 which was published in the Madhya Pradesh Gazette Extraordinary dated 12.10.1983. Therefore, the requirement of Article 254(2)of the Constitution was satisfied. Thus, M.P.Act of 1983 prevails in the State of Madhya Pradesh. Thereafter, A.C. Act 1996 was enacted by Parliament repealing the earlier laws of arbitration of 1940. It has also been noted that A.C. Act 1996 saves the provisions of M.P.Act 1983 under sub-sections 2(4) and 2(5) thereof. Therefore, there cannot be any repugnancy.”
(emphasis supplied)
3.12 Learned Advocate General submitted that in the case on hand also, it was the 1940 Act which was holding the field prior to '1992 Act of Gujarat' came to be enacted. So was the case with M.P. Act. He further submitted that the Gujarat Act also received assent of the President like that of the M.P. Act. The assent was received on 23.03.1992. Learned Advocate General submitted that to an extent, the Gujarat Act stands on a better footing as the M.P. Act did not have a provision similar to Section 21 of the Gujarat Act. He submitted that the complexion materially changes because of Section 21. Even at the cost of repetition, he reiterated that, “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 from a works contract and all arbitration proceedings in relation to such dispute before an arbitrator, umpire, court or authority shall stand transferred to the Tribunal”.
3.13 Learned Advocate General submitted that least it is argued that the aforesaid decision of the Hon'ble the Apex Court was not unanimous and a dissenting view was expressed by one of the Hon'ble Judges, I may be permitted to say that the dissenting view was only on a limited point and that is apparent from para49, which reads as under:-
“49. In view of this, the legal and logical consequence which can be reasonably drawn from the definition of `works contract' would be, that if there is a dispute between the contracting parties for any reason relating to works contract which include execution of any work, relating to construction, repair or maintenance of any building or super-structure, dam, weir, canal, reservoir, tank, lake, road, well, bridge, culvert, factory, workshop, power house, transformers or such other works of the State Government or Public Undertaking including an agreement for the supply of goods or material and all other matters relating to the execution of any of the said works, the same would fall within the ambit of the definition of `works contract' and hence all disputes pertaining or arising out of execution of the works contract will have to be referred to the M.P. State Arbitration Tribunal as envisaged under Section 7 of the Act of 1983. Hence, in addition to the reasons assigned in the judgment and order of learned Brother Justice Ganguly, disputes arising out of execution of works contract has to be referred to the M.P. State Arbitration Tribunal and not under the Arbitration and Conciliation Act, 1996.”
(emphasis supplied)
3.14 Learned Advocate General submitted that in the case before the Hon'ble the Apex Court the parties had 'cancelled the works contract' and therefore, a situation had emerged to the effect that, 'there was no existing contract'. It was in light of these facts that there was dissent recorded by the Hon'ble Judge, but so far as 'existing works contract' is concerned, there is unanimous opinion of the Bench and therefore, the said judgment will be applicable with full force to the facts of the case on hand.
3.15 Learned Advocate General submitted that a question of law, 'as to when a State law will have overriding effect over the Central law' came up for consideration before the Hon'ble the Apex Court in the matter of G.C.Kanungo Vs. State of Orissa and D.C.Routray Vs. State of Orissa, reported in AIR 1995 SC 1655, wherein the Hon'ble the Apex Court observed in para-11 as under:-
“11. Want of legislative competence on the part of the Orissa State legislature to enact the 1991 Amendment Act was indeed not argued very seriously by learned counsel for the petitioners. Subject of arbitration finds place in Entry 13 of List III, i.e., the Concurrent List of VII Schedule to the Constitution on which the legislation could be made either by Parliament or the State legislature. When there is already the legislation of Parliament made on this subject, it operates in respect of all States in India, if not excepted. Since it is open to a State legislature also to legislate on the same subject of Arbitration, in that, it lies within its field of legislation falling in an entry in the Concurrent List and when a particular State Legislature has made a law or Act on that subject for making it applicable to its State, all that becomes necessary to validate such law is to obtain the assent of the President by reserving it for his consideration.
When such assent is obtained, the provisions of the State Law or Act so enacted prevails in the State concerned, notwithstanding its repugnancy to an earlier Parliamentary enactment made on the subject ”
3.16 Learned Advocate General then invited attention of the Court to a decision of the Hon'ble the Apex Court, in which the Gujarat Act is considered, that is in the matter of Sardar Construction Co. Vs. State of Gujarat, reported in (1999) 3 SCC 114. There the Hon'ble the Apex Court held that:-
“The award in the present case, though given prior to 1.1.1994 which is the date of commencement of the Gujarat Public Works Contracts Disputes Arbitration Tribunal Act, 1992, had not attained finality at the time when the said Act came into force. Under Section 21 of the said Act, the provisions of the Arbitration Act shall, insofar as they are inconsistent with the provisions of the Act, cease to apply to any dispute arising from a works contract and all arbitration proceedings in relation to such dispute before an arbitrator, umpire, Court or authority shall stand transferred to the Tribunal. In the present case, the arbitration proceedings in relation to the dispute were pending before the court and hence the High Court has rightly transferred these proceedings to the Tribunal. Under Section 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.“
3.17 Learned Advocate General also invited attention of the Court to a judgment rendered by a learned Single Judge of this Court in the matter of Gujarat State Construction Corporation Vs. Ghanshyambhai & Bros., reported in 1997 (3) GLR 2302.
3.18 Learned Advocate General also invited attention of the Court to a decision of a learned Single Judge of this Court (Coram: Hon'ble Mr.Justice N.N.Mathur as he then was) in Civil Revision Application No.2283 of 1995 with Special Civil Application Nos.1795 of 1996, 6488 of
1997 & 6489 of 1997 dated 01.05.1998.
3.19 Learned Advocate General next invited attention of the Court to a judgment of the learned Single Judge of this Court (Coram: Hon'ble Miss Justice R.M.Doshit as she then was) in Petition under Arbitration Act No.40 of 2002 and Petition under Arbitration Act No.29 of 2003 dated 26.08.2004.
3.20 Last but not the least, learned Advocate General invited attention of the Court to a decision of the Division Bench of this Court in the matter of Sorathia Velji Ratna & Co. Vs. Gujarat Agricultural University, Dantiwada Campus & Anr., reported in 2001 (1) GCD 176 (Guj).
3.21 Learned Advocate General submitted that in the present case, it is the case of the petitioner right from the beginning that the provisions of the Arbitration and Conciliation Act, 1996 are not applicable to the dispute and it is only the provisions of the Gujarat Public Work Contract dispute Arbitration Tribunal Act, 1992 are applicable. He submitted that in view of that, the sole Arbitrator unilaterally appointed by the respondent did not have jurisdiction, meaning thereby there was lack of jurisdiction on the part of the sole Arbitrator. He submitted that this is to be appreciated in contrast with “error in exercise of jurisdiction”. In this regard, learned Advocate General invited attention of the Court to a decision of the Hon'ble the Apex Court in the matter of Budhia Swain & Ors. Vs. Gopinath Deb & Ors., reported in (1999) 4 SCC 396, wherein the Hon'ble the Apex Court was dealing with the aforesaid two terms, viz. 'lack of jurisdiction' and 'error in exercise of jurisdiction'. The Hon'ble the Apex Court in para-9 observed as under:-
“9. A distinction has to be drawn between lack of jurisdiction and a mere error in exercise of jurisdiction. The former strikes at the very root of the exercise and want of jurisdiction may vitiate the proceedings rendering them and the orders passed therein a nullity. A mere error in exercise of jurisdiction does not vitiate the legality and validity of the proceedings and the order passed thereon unless set aside in the manner known to law by laying a challenge subject to the law of limitation. In Hira Lal Patni Vs. Sri Kali Nath AIR 1962 SC 199, it was held:-
".......The validity of a decree can be challenged in execution proceedings only on the ground that the court which passed the decree was lacking in inherent jurisdiction in the sense that it could not have seisin of the case because the subject matter was wholly foreign to its jurisdiction or that the defendant was dead at the time the suit had been instituted or decree passed, or some such other ground which could have the effect of rendering the court entirely lacking in jurisdiction in respect of the subject matter of the suit or over the parties to it."
4. The matter was vehemently contested by learned Advocate Mr.B.S.Patel for the respondent. Learned Advocate for the respondent submitted that so far as legal position of applicability of the Gujarat Act having overriding effect over the Arbitration and Conciliation Act, 1996 is concerned, he does not dispute this proposition of law. The learned Advocate then submitted that the order passed by the sole Arbitrator is required to be looked into from a different angle and that is, “the sole Arbitrator has declared that subject matter of the contract does not fall within the definition of 'works contract' defined in Clause (I) of Clause(k) of sub-section (1) of Section 2 of the 1992 Act”. Learned Advocate for respondent vehemently submitted that the respondent was awarded the work of “manufacturing and supplying bricks of a particular size for bricks lining work”. Not only that, the 'manufacturing' was required to be undertaken at the site provided by the petitioner (SSNNL). Learned Advocate for the respondent emphatically submitted that a single contract for 'manufacturing and supplying of bricks' cannot be devided in two parts and it that cannot be done, the 'contract' loses its character of being a 'works contract'. The learned Advocate submitted that in the case, 1992 Act will not be applicable. One that is, then the action of the respondent of unilaterally appointing sole Arbitrator cannot be found fault with. The learned Advocate submitted that once the appointment of the 'sole Arbitrator' is valid then order passed by the sole Arbitrator becomes an order under Section 16of the Arbitration and Conciliation Act, 1996. The learned Advocate then submitted that when order is under Section 16 of the 1996 Act, the remedy available to the present petitioner is only under Section 34 and Section 37 as held by the learned Single Judge in the judgment which is the subject matter of challenge in this Letters Patent Appeal. Learned Advocate for the respondent submitted that once this contention is accepted, the only result that must ensue is dismissal of this Letters Patent Appeal. In this regard, learned Advocate for the respondent invited attention of the Court to definition of the term 'Works Contract', which is found in sub- clause-(i) of clause-(k) of sub-section-(1) of Section 2 of the Gujarat Act of 1992. The said sub-clause-(i) reads as under:-
“(i) a contract made for the supply of goods relating to the execution of any of such works.”
Clause-(k) of sub-section-(1) of Section 2 provides as under:-
”Works contract” means a contract made by the State Government or the public undertaking with any other person for the execution of any of its works relating to construction, repairs or maintenance of any building or superstructure, dam, weir, canal, reservoir, tank, lake, road, well, bridge, culvert, factory or work shop or of such other work of the State Government or, as the case may be, of the public undertaking, as the State Government may, by notification in the Official Gazette specify, and includes.
4.1 Learned Advocate for the respondent vehemently submitted that neither sub-clause-(i) or Clause-(k) covers in its sweep activity of 'manufacturing'. Learned Advocate for the respondent submitted that not only that, 'supplying of bricks' was an ancillary thing to the main contract of manufacturing of bricks.
5. This submission of the learned advocate for the respondent cannot be accepted. Plain reading of the contract makes it obvious that this is nothing but an attempt to 'put the cart before the horse'. The contract awarded was for 'manufacturing and supplying' of bricks. The petitioner (SSNNL) was interested to see that the bricks of particular size and quality are supplied. It is with that object in mind that the 'manufacturing' was covered in the contract otherwise it was for the respondent to decide whether he himself manufactures bricks or procures from out side. As such, the petitioner (SSNNL) was interested only in getting the bricks of required size and quality, of course at the agreed rate. It was only to facilitate the respondent for 'supplying bricks' to the petitioner that the petitioner (SSNNL) agreed to extend courtesy to the respondent and granted permission to manufacture the bricks at the site provided by the petitioner (SSNNL). By any standards, the submission of the learned Advocate for the respondent cannot be agreed that, 'supplying of bricks' was ancillary and 'manufacturing of bricks' was the main part of the contract given by the petitioner (SSNNL). Even if a conscious effort is made to take out the contract in question from the term 'Works Contract', it is not possible.
6. Learned Advocate for the respondent submitted that the application filed by the present appellant- original petitioner, titled as “Application regarding dispute of jurisdiction”, is suggestive of the understanding of the nature of the dispute. He submitted that the application did not mention that the 'sole Arbitrator' has 'no jurisdiction'
7. Right, it was an application which contended that the unilaterally appointed sole Arbitrator has no jurisdiction. But only because the words used are, 'regarding dispute of jurisdiction', will not change the nature of the contract and the contention raised therein. It was specifically mentioned in the application that, 'the sole Arbitrator has no jurisdiction' to entertain the claim of the respondent. It was mentioned in so many words that under Section 21, even pending matters are required to be transferred to the Tribunal and therefore, there is no question of new matter being referred to the Arbitrator under the 1996 Act.
7.1 The submission of the learned Advocate for the respondent is found to be not acceptable and accordingly the same is rejected.
8. Learned Advocate for the respondent submitted that in reply to the said application, the respondent had stated that:-
“1) 1) ..... the Bhaven Construction were given the contract for the Bricks, but, in fact, looking to the contract, the said contract was for “Manufacturing and supplying of bricks of the size 222mm x 112.5 mm x 70 mm for Brick Lining work of Distributory and Minors in the Command Area of Narmada Main Canal, KM OO to KM 144.00 i.e. between river Narmada and Mahi (Block No.4-A, 4-B, 5, 8)” and hence, the respondent's contentions to that effect are not true, nor acceptable to the claimant.”
9. This submission is already considered and replied hereinabove. The question is as to whether the petitioner (SSNNL) was interested in manufacturing of bricks by the respondent or was concerned with supply of bricks of required size and quality. The nature of the contract is clear from the correspondences between the appellant and the respondent that the petitioner (SSNNL) wanted the respondent to supply the bricks and 'manufacturing' was ancillary thing. The same was provided in the contract because the bricks of a particular size and quality were required to be supplied. Not only that, it was also provided in the contract that, the bricks must be 'machined manufactured' and not manually manufactured. That being so, this Court has no hesitation in rejecting the submission of the learned Advocate for the respondent that the main contract was for manufacturing of bricks and supply was ancillary to that.
10. Learned Advocate for the respondent then invited attention of the Court to the order dated 20.10.2001 passed by the sole Arbitrator, appointed by the respondent and submitted that the order is passed under Section 16 of the Arbitration and Conciliation Act, 1996 and therefore, remedy available to the petitioner is only under Section 34 and Section 37 of the said Act, as is held by the learned Single Judge.
11. As discussed hereinabove, 'the contract' is a “Works Contract” and a dispute is raised by the petitioner at the earliest available opportunity about the 'forum' in which the dispute be adjudicated. It was as early as on 23.11.1998, the appellant denied that in view of Clause-38, wherein it is provided that, 'provision of Indian Arbitration Act, 1940 and any statutory modification thereof will be applicable', the respondent cannot appoint a sole Arbitrator and thereafter cannot contend that now that the Arbitrator is already appointed and he (the Arbitrator) has already exercised power under the provisions of the Arbitration and Conciliation Act, 1996, the petitioner has to wait till the arbitration award is passed, to challenge the same under Section 34 and Section 37 of the 1996 Act.
11.1 As discussed hereinabove, there is no doubt that the 'Gujarat Public Works Contract Disputes Arbitration Tribunal Act, 1992' holds the field and not the Arbitration and Conciliation Act, 1996 because 1992 Act was submitted to the President for consideration and the President has accorded 'assent' to the same on 23.03.1992. As is held by the Hon'ble the Apex Court in the matter of Madhya Pradesh Rural Road Development Authority (supra), 1992 Act will hold the field. All contentions raised by the learned Advocate for the respondent are found unacceptable and the same are rejected.
12. In the result, we allow this appeal. Order dated 20.10.2001 of the sole Arbitrator along with judgment and order dated 29.12.2005 passed by learned Single Judge in Special Civil Application No.400 of 2002 are quashed and set aside. The parties may take recourse, if they so desire and decide, for adjudication of the disputes by approaching Arbitration Tribunal, constituted under the Gujarat Act of 1992. As stated by the learned Advocate General, the respondent will not be non-suited on the ground of delay, as the proceedings were pending before this Court.
(Ravi R.Tripathi, J.)
*Shitole
(N.V.Anjaria, J.)