1. Rejection of application seeking amendment in the application for setting aside Arbitration Award under the Arbitration and Conciliation Act, 1996 (hereinafter referred to as 'AC Act') by order dated 14.2.2014 by the Seventh Additional District Judge, Bhopal has led the objector to an Award file this writ petition under Article 227 of the Constitution of India.
2. Undisputed facts borne from the record are that a contract for consultancy and its implementation services for third party evaluation and quality control/assurance for construction of building costing about Rs.75,372.31 lakh in accordance with specifications and relevant I.S. Codes using funds provided by Rajya Shiksha Kendra Bhopal was entered into between the petitioner and respondent on 29.1.2007.
3. That, on there being certain allegations of contractor entering into certain unlawful activities in respect of payment of first and second bills, an enquiry was caused. Pending the outcome of said enquiry, respondent-contractor was stopped from carrying out further work. This gave rise to a dispute for non-payment of bills and associate claim.
4. Since there exists an arbitration clause 16 in the Agreement stipulating that "Any dispute arising out of the contract, which cannot be amicably settled between the parties, shall be referred to adjudication at Bhopal in accordance with the Arbitration and Conciliation Act, 1996; contractor invoking the same sought the resolution of the dispute through an arbitration by filing an application under Section 11(6) of the Arbitration and Conciliation Act, 1996 before the High Court vide Arbitration Case No.15/2008 for appointment of Arbitrator. That, sole arbitrator, retired Judge of this Court Hon. Shri Justice S.S. Jha, was appointed by order-dated 4.9.2008.
5. An Award came to be passed on 10.7.2010; whereby, while allowing the claim by the contractor, the counter claim by the State of M.P. (petitioner) was dismissed.
6. Aggrieved, the State Govt. and its functionaries brought an action under Section 34 of AC Act on 28.10.2010; wherein, on 7.8.2013, an application seeking amendment in the objection under Section 34 was filed to the effect of incorporating the objection as regard to jurisdiction of the Arbitrator to entertain the dispute under AC Act on the plea that being a 'work contract' and the State Government being one of the parties to the contract, the jurisdiction lay with the Arbitration Tribunal constituted under the M.P. Madhyastham Adhikaran Adhiniyam, 1983. The amendment was objected at by the respondents herein on three grounds, viz. that -
(i) the ground for challenge being sought to be added after a period of 120 days is barred by time as the time limit prescribed under AC Act is absolute and unextendable;
(ii) the order appointing the sole arbitrator having been allowed to attain finality and the objector having participated in the proceedings is precluded from raising the objection having acquiesced and
(iii) the judgment in M.P. Rural Road Development Authority vs. L.G. Choudhary Engineers and Contractors (2012) 3 SCC 495 is not applicable in the given facts.
7. Objections to amendment having found favour led the Court reject the application for amendment by impugned order by taking into consideration the fact that the objector having not questioned the appointment of Arbitrator which, in turn, was by virtue of order by the High Court in a proceeding under Section 11(6) of AC Act and thus, acquiesced to the proceedings is estopped from raising the objections which, if allowed, would swipe the very appointment of the Arbitrator. In order words, the objection as to jurisdiction of the Arbitrator, if allowed, to be taken the same would tantamount to question the correctness of order under Section 11(6) of AC Act, which attained finality. The Court also found that the preliminary objection raised at the stage of Section 34 of AC Act also suffers from limitation.
8. Assailing the order, it is urged that the same being contrary to law, facts and circumstances deserves to be set aside.
9. Since it is not in dispute that the contract in question is works contract; therefore, before dwelling on the contentions and counter contentions, and the effect of clause 16 in the agreement opportune it would to first take note of the law relating to work contract as it is applicable in the State of Madhya Pradesh.
10. That, the M.P. Madhyastham Adhikaran Adhiniyam, 1983 which received the assent of President on 7th October, 1983, was enacted to provide for the establishment of a Tribunal to arbitrate in disputes to which the State Government or a Public Undertaking wholly or substantially controlled by the State Government is a party and for matters incidental thereto or connected therewith. And, as observed in State of Madhya Pradesh vs. Anshuman Shukla : (2008) 7 SCC 487 by their Lordships "14. The Act is a special Act. It provided for compulsory arbitration. It provides for a reference. The Tribunal has the power of rejecting the reference at the threshold. It provides for a special limitation. It fixes a time limit for passing an Award. Section 14 of the Act provides that proceeding and the award can be challenged under special circumstances. Section 17, as noticed hereinbefore, provides for finality of the award, notwithstanding anything to the contrary contained in any other law relating to arbitration."
11. It was also observed by their Lordships in Anshuman Shukla (supra) :
"28. The provisions of the Act referred to hereinbefore clearly postulate that the State of Madhya Pradesh has created a separate forum for the purpose of determination of disputes arising inter alia out of the works contract. The Tribunal is not one which can be said to be a Domestic Tribunal. The Members of the Tribunal are not nominated by the parties. The disputants do not have any control over their appointment. The Tribunal may reject a reference at the threshold. It has the power to summon records. It has the power to record evidence. Its functions are not limited to one Bench. The Chairman of the Tribunal can refer the disputes to another Bench. Its decision is final. It can award costs. It can award interests. The finality of the decision is fortified by a legal fiction created by making an Award a decree of a Civil Court. It is executable as a decree of a Civil Court. The Award of the Arbitral Tribunal is not subject to the provisions of the Arbitration Act, 1940 and the Arbitration and Conciliation Act, 1996. The provisions of the said Acts have no application. "
12. Some ripples were caused with a decision in Va Tech Escher Wyass Flovel Limited vs. Madhya Pradesh State Electricity Board and another : (2011) 13 SCC 261 wherein it was held :
"3. ... In our opinion, the 1983 Act and the 1996 Act can be harmonised by holding that the 1983 Act only applies where there is no arbitration clause but it stands impliedly repealed by the 1996 Act where there is an arbitration clause. We hold accordingly. Hence, the impugned judgment cannot be sustained and we hold that the application under Section 9 of the 1996 Act was maintainable."
13. Placing reliance on the decision in Va. Tech (supra) in a similar facts situtation as in the present case Supreme Court in APS Kushwaha (SSI UNIT) vs. Municipal Corporation, Gwalior and others : (2011) 13 SCC 258 held :
"7. This court, in V.A.Tech Escher Wyass Flovel Ltd. vs. M.P. S.E.Board (C.A. No.3746/2005 decided on 14.1.2010) held that the provisions of the Act would apply where there was an Arbitration clause and the provisions of the 1983 Adhiniyam would apply where there was no Arbitration clause. In this case it is not in dispute that the contract between the parties contained an arbitration clause (clause 29). The decision of the High Court that the provisions of the 1983 Adhiniyam would apply and sole arbitrator appointed by the designate of the Chief Justice lacked inherent jurisdiction, cannot therefore be sustained. Though the said Arbitration clause provided for reference of disputes to a three member Arbitration Board, the designate chose to appoint a sole arbitrator and that order dated 11.5.2007 attained finality."
14. However, the aspect of applicability of the Act of 1983 or the Act of 1996 in a 'works contract' came to be considered in Madhya Pradesh Rural Road Development Authority and another vs. L.G.Chaudhary Engineers and Contractors : (2012) 3 SCC 495 wherein after taking into consideration the provisions of Act 1983 being saved under Section 2(4) and 2(5) of 1996 Act declared the decision in Va Tech (supra) being per incuriam, holding :
"18. If this Court compares the provisions of the M.P. Act with A.C. Act 1996 then the Court finds that the provisions of M.P. Act are inconsistent with the provisions of A.C. Act 1996. The M.P. Act is a special law providing for statutory arbitration in the State of Madhya Pradesh even in the absence of arbitration agreement. Under the provisions of A.C. Act 1996 in the absence of an arbitration agreement, arbitration is not possible. There is also difference in the formation of arbitration tribunal as is clear from Section 2(1)(d) of A.C. Act 1996. Again under A.C. Act 1996, arbitral tribunal is defined under Section 2(1)(d) as a sole arbitrator or a panel of arbitrators. But under M.P. Act such a tribunal is created under Sections 3 and 4 of the Act. And under the M.P. Act dispute has a special meaning as defined under Section 2(1)(d) of the Act whereas dispute has not been defined under the A.C. Act 1996.
19 . It is clear from its long title that the M.P. Act provides :
" .... for the establishment of a tribunal to arbitrate in disputes to which the State Government or a public undertaking [wholly or substantially owned or controlled by the State Government], is a party, and for matters incidental thereto or connected therewith."
20. The structure of the Tribunal under the Madhya Pradesh Act is also different from the structure of a Tribunal under the AC Act, 1996 ..... "
23. It is clear from the aforesaid enumeration of the statutory provisions that under the M.P. Act the parties' autonomy in the choice of Arbitaral Tribunal; is not there.
(emphasis supplied)
26. It is clear, therefore, that in view of the aforesaid finding of a co-ordinate Bench of this Court on the distinct feature of an arbitral tribunal under the said M.P. Act the provisions of M.P. Act are saved under Section 2(4) of A.C. Act 1996. 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.
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 24 of M.P. Act 1983 under sub-sections 2(4) and 2(5) thereof. Therefore, there cannot be any repugnancy. (See the judgment of this Court in T. Barai vs. Henry Ah Hoe.)
41. It is clear from the aforesaid observation that in instant case the latter Act made by the Parliament i.e. A.C. Act 1996 clearly showed an intention to the effect that the State Law of Arbitration i.e. the M.P. Act should operate in the State of Madhya Pradesh in respect of certain specified types of arbitrations which are under the M.P. Act 1983. This is clear from Sections 2(4) and 2(5) of A.C. Act 1996. Therefore, there is no substance in the argument of repugnancy and is accordingly rejected.
42. Therefore, appeal is allowed and the judgment of the High Court which is based on the reasoning of Va Tech (supra) is set aside. This Court holds the decision in Va Tech (supra) has been rendered in per incuriam. In that view of the matter the arbitration proceeding may proceed under M.P. Act of 1983 and not under A.C. Act 1996."
15. This view that in respect of works contract it is the Tribunal constituted under 1983 Act and no other forum is available was concurred with by Hon'ble Justice Gyan Sudha Mishra in the following terms :
"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."
16. Thus, there remains no iota of doubt that in case of works contract covered by the provisions of 1983 Act, any dispute is compulsorily has to be raised before the Tribunal constituted under the Act of 1983 which necessarily means that the forum under 1996 Act are excluded.
17. The question would then be whether in a given case, as the present one, where the parties have entered into a contract State Government or a public undertaking wholly or substantially owned or controlled by the State Government, as in the case at hand, agrees to a forum under 1996 Act, are they bound by it and any action thereon could be termed to be within jurisdiction. The emphatic answer is no.
18. In Chiranjilal Shrilal Goenka vs. Jasjit Singh and ors. : (1993) 2 SCC 507 whole holding that a consent to refer the dispute for arbitration of dispute in the pending probate proceedings, cannot confer jurisdiction nor an estopple against statute, their Lordships were pleased to hold :
"17. We agree with Mr. Chidambaram that the applicant had consented to refer the dispute for arbitration of dispute in the pending probate proceedings, but consent cannot confer jurisdiction nor an estoppel against statute. The other legatees in the Will were not parties to it. In A.R. Antulay Vs R.S. Nayak when a Constitution Bench directed the High Court Judge to try the offences under the Prevention of Corruption Act with which the petitioner therein was charged and the trial was being proceeded with, he questioned by way of writ petition the jurisdiction of this Court to give such a direction. A Bench of seven judges per majority construed meaning of the word 'jurisdiction', Mukharji, J. as he then was, speaking per himself. Oza and Natarajan, JJ. held that the power to create or enlarge jurisdiction is legislative in character. So also the power to confer a right of appeal or to take away a right of appeal. The Parliament alone can do it, by law and not Court, whether superior or inferior or both combined, can enlarge the jurisdiction of a Court and divest a person of his rights of appeal or revision. Ranganath Mishra, J. as he then was, held that jurisdiction comes solely from the law of the land and cannot be exercised otherwise. In this country, jurisdiction can be exercised only when provided for either in the Constitution or in the laws made by the Legislature. Jurisdiction is thus the authority or power of the Court to deal with a matter and make an order carrying binding force in the facts. Oza, J. supplementing the question held that the jurisdiction to try a case could only be conferred by law enacted by the legislature. The Supreme Court could not confer jurisdiction if it does not exist in law. Ray, J. held that the Court cannot confer a jurisdiction on itself which is not provided in the law. In the dissenting opinion Venkatachaliah, J., as he then was, lay down that the expression jurisdiction or prior determination is a "verbal coat of many colours". In the case of a Tribunal an error of law might become not merely an error in jurisdiction but might partake of the character of an error of jurisdiction. But, otherwise, jurisdiction is a 'legal shelter' and a power to bind despite a possible error in the decision. The existence of jurisdiction does not depend on the correctness of its exercise. The authority to decide embodies a privilege to bind despite error, a privilege which is inherent in and indispensable to every judicial function. The characteristic attribute of a judicial act is that it binds whether it be right or it be wrong. Thus this Court laid down as an authoritative proposition of law that the jurisdiction could be conferred by statute and this Court cannot confer jurisdiction or an authority on a tribunal. In that case this Court held that Constitution Bench has no power to give direction contrary to Criminal Law Amendment Act, 1952. The direction per majority was held to be void."
19. Next question is, whether having travelled at substantial distance in an arbitration proceedings, one of the party can turn around at a later stage to question the jurisdiction.
20. An answer can be found in the decision in Chiranjilal Shrilal Goenka (supra), Harshad Chiman lal Modi vs. DLF Universal Ltd.and another : (2005) 7 SCC 791 and Rajasthan State Road Transport Corporation and another vs. Bal Mukund Bairwa : (2009) 4 SCC 299.
In Harshad Chiman lal Modi (supra) it is held :
"30. We are unable to uphold the contention. The jurisdiction of a court may be classified into several categories. The important categories are (i) Territorial or local jurisdiction; (ii) Pecuniary jurisdiction; and (iii) Jurisdiction over the subject matter. So far as territorial and pecuniary jurisdictions are concerned, objection to such jurisdiction has to be taken at the earliest possible opportunity and in any case at or before settlement of issues. The law is well settled on the point that if such objection is not taken at the earliest, it cannot be allowed to be taken at a subsequent stage. Jurisdiction as to subject matter, however, is totally distinct and stands on a different footing. Where a court has no jurisdiction over the subject matter of the suit by reason of any limitation imposed by statute, charter or commission, it cannot take up the cause or matter. An order passed by a court having no jurisdiction is nullity.
32. In Bahrein Petroleum Co., this Court also held that neither consent nor waiver nor acquiescence can confer jurisdiction upon a court, otherwise incompetent to try the suit. It is well-settled and needs no authority that 'where a court takes upon itself to exercise a jurisdiction it does not possess, its decision amounts to nothing.' A decree passed by a court having no jurisdiction is non-est and its validity can be set up whenever it is sought to be enforced as a foundation for a right, even at the stage of execution or in collateral proceedings. A decree passed by a court without jurisdiction is a coram non judice."
21. In Bal Mukund Bairwa (2) (supra) there Lordships were pleased to hold :
"50. We may also observe that the application of doctrine of prospective overruling in Krishna Kant may not be correct because either a court has the requisite jurisdiction or it does not have. It is well settled principle of law that the court cannot confer jurisdiction where there is none and neither can the parties confer jurisdiction upon a court by consent. If a court decides a matter without jurisdiction as has rightly been pointed out in Zakir Hussain in view of the seven-Judge Bench decision of this Court in A.R. Antulay, the same would be nullity and, thus, the doctrine of prospective overruling shall not apply in such cases. Even otherwise doctrine of prospective overruling has a limited application. It ordinarily applies where a statute is declared ultra vires and not in a case where the decree or order is passed by a court/tribunal in respect whereof it had no jurisdiction. [See Golak Nath and ors. vs. State of Punjab.]"
22. In Chiranjilal Shrilal Goenka (supra) their Lordships while holding:
"18. It is settled law that a decree passed by a court without jurisdiction on the subject matter or on the grounds on which the decree made which goes to the root to its jurisdiction or lacks inherent jurisdiction is a corum non judice. A decree passed by such a court in a nullity and is non-est. Its invalidity can be set up whenever it is sought to be enforced or is acted upon as a foundation for a right, even at the stage of execution or in collateral proceedings. The defect of jurisdiction strikes at the very authority of the court to pass decree which cannot be cured by consent or waiver of the party."
23. Thus, when the objection is in respect of jurisdiction over subject matter it is immaterial at what stage it is taken because it strikes at the very jurisdiction of the Court or the forum exercising the jurisdiction.
24. The impugned order when tested on the anvil of the principle of law laid down and the analysis thereof is not substantiable; therefore, set aside. The amendment application filed by the objector, present petitioner is allowed. Let the same be incorporated within 15 days from the date of communication of this order.
25. Consequential amendment if any within four weeks therehence.
26. Learned trial Court is expected to decide the matter expeditiously.
Petition is allowed to the extent above. However, no costs.