Author: Bharat Sharma, 3rd Year, RNB Global University.
Date of Decision: January 6, 2021
Bench: N. V. Ramana, Surya Kant, Hrishikesh Roy
Original Copy: View
Issue in question:
- Whether the Gujarat Public Work Contracts Disputes Arbitration Tribunal Act, 1992 is applicable or not?
- Whether the sole Arbitrator has the jurisdiction to adjudicate this dispute or not?
Background of the case:
- On 13.02.1991, the Respondent No. 1 and the appellant created a contract between themselves. The contract was related to the manufacture and supply of bricks. Certain disputes had arisen for the payment of manufacture and supply of bricks for which the appellant had issued a notice on 13.11.1998 regarding appointment of sole arbitrator.
- On 23.11.1998 and 04.01.1998 Respondent No. 1 in reply to the notice issued by Appellant, did not agree on two grounds mentioned by Appellant. Firstly, the arbitration was decided to be conducted through the Indian Arbitration Act and Gujarat passed the Gujarat Public Works Contracts Dispute Arbitration Tribunal Act, 1992. So the dispute was to be resolved in accordance with this provision.
- Secondly if the Arbitrator is not appointed before expiration of thirty days neither party was able to claim because of that the Arbitration was time interrupted. Respondent No. 2 was appointed by the appellant to adjudicate the dispute arising between the parties. Respondent No. 1 disagreed with this and filed an application under Section 16 of the Arbitration and Conciliation Act 1996, disputing the grounds of jurisdiction of the sole arbitrator. The application of Respondent No. 1 was dismissed by the sole arbitrator on 20.10.2001, holding that the sole arbitrator had jurisdiction to look into the matter and settle the dispute.
- A Special Civil Application No. 400 of 2002 was filed by the Respondent No. 1, before Gujarat High Court under Articles 226 and 227 of the Constitution. Single Judge while dismissing the application of respondent No. 1, and upheld the Supreme Court’s decision in two cases. And with considering the order passed by the sole arbitrator, dismissing the petitioner’s application, which challenging the jurisdiction of sole Arbitrator and held that the petition under Articles 226 and 227 was not entertained and the only remedy was available for the petitioner is that wait for the decision of Arbitrator.
- Respondent No. 1 filed Letters Patent Appeal in Special Civil Application aggrieved by the order passed by the Single Judge. On 17.09.2012 the Gujarat High Court allowed the application of Respondent No.1 .
- Aggrieved by the order passed by Single Judge Respondent No. 1, appeal through special leave petition. The High Court of Gujarat allowed the appeal and said:- That the appellant denied the application of the Indian Arbitration Act, 1940 and the respondent could not appoint a sole arbitrator, but now the arbitrator is already appointed and under the Arbitration and Conciliation Act was started using of his power. The petitioner must wait till the order is passed by the arbitrator and can be challenged under Sections 34 and 37 of the 1996 Act.
- The court observed that the Respondent No. 1 was not able to prove the exceptional circumstance or bad faith on the side of Appellant. Court said that the impugned order of sole Arbitrator was announced by him on merits, which is challenged by Respondent No. 1 under Section 34 application, which is pending. The High court also said appointment of the Arbitrator was done by Appellant unilaterally or without the consent taken from the Respondent No. 1 .
- Although Respondent No. 1 did not take any legal action against the appointment of the Arbitrator. The Court observed that the award was already passed during the continuation of this appeal. And that already challenged by Respondent No. 1 under Section 34. The Decision Bench said the contract is a work contract and that’s why the Gujarat Act applicable not the Arbitration Act. It was noted by the court that Section 16 of Arbitration Act provided that the first appeal related to jurisdiction dealt with the tribunal, before the court examines. Respondent No. 1 not left remediless, and Respondent No.1 has provided a chance to appeal.
- So the Division Bench of Gujarat High Court allowed the appeal of Respondent No. 1 and set aside the impugned order passed by the High Court. Court also held that Respondent No. 1 is at liberty to take any legal action regarding the question of jurisdiction in the pending Section 34 proceedings.
- In this present case Section 5 of the Arbitration Act, 1940 was taken into consideration which is related to the intervention of the judicial authorities in some exceptional conditions. Section 7 of the Arbitration Act which talks about the ingredients for the Arbitrator agreement and if parties fail to follow the proceedings regarding the appointment of the Arbitrator then parties can take recourse under Section 8 and 11 of the Arbitration Act.
- The ‘principle of unbreakability’ was also discussed in this case. Section 2(k) was also observed by the court which is related to the work contract. As this case is related to the supply of bricks it comes under the same as the contract for supply of goods related to execution of work which is specified in this Section.