M/S. Unik Accurates Pvt. Ltd. v. M/S. Sumedha Fiscal Services Ltd.

Bhaskar Bhattacharya, J.:—This Rule is directed against order dated March 10, 2000 passed by an arbitral Tribunal in a proceeding under the Arbitration and Conciliation Act, 1996 (“Act”).

2. Pursuant to an agreement dated January 22, 1996 between the parties, the opposite party preferred a statement of claim before the arbitral Tribunal consisting of a sole arbitrator in accordance with the provision contained in the Act.

3. The petitioner after appearing before the Tribunal took out an application under section 16 of the Act challenging the validity and/or existence of the arbitration agreement and the jurisdiction of the Tribunal to decide the matter and also took other grounds touching jurisdiction.

The Tribunal by the order dated February 23, 2000 rejected the application under section 16 of the Act by a reasoned order.

4. Thereafter the petitioner came up with an application under sections 12 and 13 read with section 18 of the Act thereby praying for withdrwal of the arbitrator from the office and/or from reference on the grounds stated herein.

5. The main grievance of the petitioner in the above application was that in rejecting the application under section 16 of the Act, the Tribunal relied upon a document which was not at all produced before such Tribunal at the time of hearing and as such the aforesaid fact suggested that the Tribunal acted on a special knowledge of a fact relating to the opposite party. The petitioner thus contended that the Tribunal not having disclosed to the petitioner or its learned advocate such fact, raised reasonable doubt about his impartiality. It was further alleged that the petitioner subsequently came to know that the sole arbitrator as a learned advocate represents ‘financiers’ in hire-purchase agreements and the points raised by the petitioner in the application under section 16 of the Act, if decided in favour of the petitioner, would affect the financiers in general.

6. By the order impugned herein the Tribunal first recorded that the said application under sections 12 and 13 of the Act was moved and that the same was opposed as not maintainable. Thereafter, the Tribunal recorded the fact that the learned advocate for the opposite party prayed for leave to file the notifications dated August 16, 1995 and December 2, 1998 issued by Reserve Bank of India showing that his client was a Banking financial company which were not filed earlier due to inadvertence and that the said advocate asked for to leave hand over copies of those documents to the learned counsel for the petitioner. The Tribunal further recorded that such leave was granted without prejudice to the rights and contentions of the parties and that the learned counsel accepted those copies accordingly. Lastly, the Tribunal recorded that by the consent of the parties it was decided that if the petitioner intended to file any objection, the same should be filed by March 20, 2000 and the next date was fixed for hearing of the application on March 24, 2000.

7. Being dissatisfied, the petitioner moved an application under Article 227 of the Constitution of India upon which the instant Rule was issued.

8. Mr. Deb, the learned counsel appearing on behalf of the opposite party at the very outset raised a preliminary objection to the maintainability of the instant application under Article-227 of the Constitution of India. By relying upon two decisions of the Supreme Court, one in the case of Bharat Bank Ltd. v. Employees of Bharat Bank Ltd., reported in AIR 1950 SC 188 and the other, in the case of Engineering Mazdoor Sabha v. Hind Cycles Ltd., reported in AIR 1963 SC 874, Mr. Deb contends that in the instant case the Tribunal consisting of the sole arbitrator having been appointed by the agreement of the parties, should be deemed to be domestic Tribunal and as such Article 227 of the Constitution of India cannot be invoked against decision of any such Tribunal. According to Mr. Deb, in order to maintain an application under Article 227 of the Constitution, the Tribunal, whose order is sought to be impugned, must be one, constituted by the State.

9. Mr. Baneijee, the learned counsel appearing on behalf of the petitioner has opposed the aforesaid contention of Mr. Deb with vehemence. According to Mr. Baneijee, position of an arbitral Tribunal under the Act is different from that of an arbitrator under the Arbitration Act, 1940 (“1940 Act”). Mr. Baneijee by referring to the various provisions of the Act and those of the 1940 Act points out that under the Act, an award passed by an Arbitral Tribunal can be enforced like a decree without having any stamp of the court which was not provided in the 1940 Act. Mr. Banerjee further submits that under the Act the arbitral Tribunal has been given authority to pass even interim orders and some of such orders are even made appealable before the court. Those provisions, Mr. Baneijee contends, suggest that an arbitral Tribunal is vested with the function of the State in the matter of imparting justice although such Tribunal is not ‘constituted’ by the State.

10. Before I proceed to answer the aforesaid preliminary objection raised by Mr. Deb, we should bear in our mind that the word ‘Tribunal’ finds place not only in Article 227 of the Constitution of India but also inter alia in Article 136 thereof and it has been held by the Apex Court in the case of A.C Companies v. P.N Sharma, reported in AIR 1965 SC 1595, that the said word carries the same meaning in both the aforesaid Articles. The Supreme Court had occasions to deal with the word ‘Tribunal’ appearing in Article 136 of the Constitution of India in several cases and as such the principles laid down therein will also govern us in ascertaining the meaning of that word as mentioned in Article 227 of the Constitution.

11. In the case of Bharat Bank Ltd. v. Employees of Bharat Bank, AIR 1950 SC 188, the Supreme Court was considering the question whether an Industrial Tribunal within the meaning of Industrial Disputes Act, 1947 was a Tribunal within the scope of Article 136 of the Constitution of India. Speaking for the majority, Mahajan, J. held that the condition precedent for bringing a Tribunal within the meaning of Article 136 is that it should be constituted by the State and that it should discharge judicial or quasi-judicial function of the State.

12. In the case of Durga Sankar Mehta v. Raghuraj Singh, AIR 1954 SC 520, Mukheijee, J. by following the decision in the case of Bharat Bank Ltd. (supra) further clarified that the expression ‘Tribunal’ as used in Article 136 does not mean the same thing as ‘Court’ but include within its ambit, all adjudicating bodies provided they were constituted by the State and invested with judicial as distinguished from purely administrative or executive function subject to the exception provided in Article 136(2).

13. In the case of Engineering Mazdoor Sabha v. Hind Cycles Ltd., AIR 1963 SC 874, the question before the court was whether an arbitrator appointed under section 10A of the Industrial Disputes Act could be said to be a Tribunal under Article 136(1). The court answered the question in negative mainly on the ground that the appointment of such arbitrator was essentially based on agreement of the parties concerned and as such his position was somewhat analogous to that of an arbitrator appointed by the parties.

14. Ultimately, in the case of A.C Companies v. P.N Sharma (supra) a Bench consisting of five Judges unanimously laid down that “the main and the basic test, however, is whether the adjudicating power which a particular authority is empowered to exercise, has been conferred on it by a statute and can be described as a part of the State's inherent power exercised in exercising its judicial function.”

15. In the aforesaid case of A.C Companies (supra), Bachwat, J. in his Lordship's separate but concurring judgement pointed out that an authority other than a court might be vested by statute with judicial power in widely different circumstances, which it would be impossible and indeed inadvisable to attempt to define exhaustively. “The proper thing is”, his Lordship opined, “to examine each case as it arises and to ascertain whether the power vested in the authority can be truly described as judicial function or judicial power of the State.” His Lordship further held that any outside authority empowered by State to determine conclusively the rights of two or more contending parties with regard to any matter in controversy between them satisfied the test of an authority vested with the judicial power of the State and may be regarded as Tribunal. His Lordship hastened to add that the aforesaid test of a Tribunal was not meant to be exhaustive and it might be that other bodies not satisfying those tests might also be Tribunal within that Article.

16. Keeping in view of the aforesaid principles I now propose to consider whether an arbitral Tribunal under the Act is a Tribunal within the meaning of Article 227 of the Constitution.

17. At this stage, I am quite conscious that an arbitrator under 1940 Act or an arbitrator under section 10A of the Industrial Disputes Act could not pass through the aforesaid tests in the eyes of the Apex Court. But it my view, the position of an arbitral Tribunal under the Act is quite different. Under the Act, an award, if not challenged by taking recourse to section 34 and if consequently not set aside, attains the character of decree without any further approval of the court. Such was not the position of an award under 1940 Act. Thus, the statute, viz. the Act has empowered an arbitral Tribunal, an outside authority, to conclusively determine the controversy if referred to it by the parties and the State is lending its support to enforce such award through assistance of the Civil Court subject of course to the provision contained in section 34 of the Act if availed of by the dissatisfied party.

18. But the most glaring provisions of the Act which manifest the intention of the State to delegate its inherent judicial function to an arbitral Tribunal are section 17 of the Act, conferring right upon such Tribunal to take “any interim measures” before passing of the award and section 37 of the Act, giving ‘right of appeal’ against an order of Tribunal under section 17 or accepting the plea referred to in section 16(2) or section 16(3) of the Act to a court meaning a principal civil court of original jurisdiction in a district or High Court in exercise of its ordinary original jurisdiction in a case where the latter has jurisdiction to decide the subject matter of arbitration if the same has been the subject matter of a suit.

19. Bestowal of a power to pass “any interim measure” has a far-reaching implication upon the rights of a citizen and that is why the Act has adequately protected the rights of the people by making provision of an appeal before the court against any such order passed by the Tribunal.

20. The true nature of right of appeal, as pointed out by the Apex Court in the case of Sankar Ramchandra Abhyankar v. Krishnaji Dattatroya Bapat, AIR 1970 SC 1, is one of entering a superior Tribunal and invoking its aid and interposition to redress the error of the Tribunal below. Two things, Gover, J. was of the view, which are required to constitute appellate jurisdiction are the existence of superior and inferior Tribunal and the power of the former to review the decision of the latter. Moreover, the doctrine of merger immediately comes into play.

21. Therefore to confer an appellate power upon the court against an order of the arbitral Tribunal means such Tribunal is under the supervision of the Principal Court of civil jurisdiction in a district or High Court, as the case may be, and upon conclusion of the appeal, the initial order merges with the order of such court. Now, the moment a principal civil court in a district disposes of such an appeal, the order of such court becomes a ‘case decided’ within the meaning of section 115 of the Code of Civil Procedure and will be amenable to the revisional jurisdiction of High Court subject to the restriction imposed in section 115 of the Code as no second appeal lies.

22. Thus, once it is established that an arbitral Tribunal is subject to the supervision of a principal civil court of original jurisdiction in a district or of High Court in exercise of ordinary original jurisdiction it will be preposterous to contend that such Tribunal does not come within the preview of Article 227 of the Constitution.

23. Mr. Deb by placing strong reliance upon the decision of the Supreme Court in the case of Engineering Mazdoor Sabha (supra) contended that unless the arbitrator is appointed by State, such arbitrator can in no case be said to be a Tribunal within the meaning of Article 227 of the Constitution of India. As pointed out by Bachwat, J. in the case of A.C Companies v. P.N Sharma (supra) that the tests mentioned in the cases of Bharat Bank Ltd. (supra) or Durgasankar Mehta (supra) or Engineering Mazdoor Sabha (supra) were not meant to be exhaustive and it might be that other bodies not satisfying those tests might also be Tribunal within Articles 136 or 227 of the Constitution of India.

24. We must bear in mind that a decision is an authority for what it decides and not what can be logically deduced therefrom. It is also well known that even a slight distinction in the fact or an additional fact may make a lot of difference in the decision making process. (See Krishna Kumar v. Union of India, 1990 (4) SCC 207; Commissioner Of Income Tax v. Sun Engineering Works (P) Ltd., AIR 1993 SC 43; Municipal Corporation Of Delhi v. Gurnam Kaur ., AIR 1989 SC 38).

25. In the case of Engineering Mazdoor Sabha (supra) the question was whether the arbitrator within the meaning of section 10A of the Industrial Disputes Act was a Tribunal. Under the aforesaid Act, there is no provision of any appeal against an order of such arbitrator to a civil court. Therefore, their Lordships had no occasion to consider the additional feature present in the instant case. Such is the position also in the other Supreme Court cases. Moreover, in none of those cases the award of the Tribunal could be enforced like a decree before getting any seal of approval from the court. Therefore, simply because arbitral Tribunal is appointed by the parties, the decision in the case of Engineering Mazdoor Sabha cannot be held to be binding upon this case.

26. Counsel for the parties could not place any decision where notwithstanding the provision of appeal before a principal civil court of original jurisdiction or High Court against an order passed by an authority, such authority has not been held to be Tribunal within the meaning of Articles 136 or 227 of the Constitution particularly when an award passed by such authority has the force of a decree without approval of such award by a court.

27. In view of my findings above I hold that an arbitral Tribunal under the Act is a Tribunal within the meaning of Article 227 of the Constitution as the Act has conferred upon such Tribunal inherent judicial power of the State.

I thus overrule the preliminary objection taken by Mr. Deb.

28. On merit however I do not find any substance, the arbitral Tribunal, as it appears from the order impugned, has not yet decided the application under sections 12 and 13 of the Act but has merely fixed a further date of hearing of the said application. Therefore, at this stage I do not find any justification of entering into the allegations of the petitioner made in the said application.

29. This Rule is thus discharged and all interim orders stand vacated. Since the main Rule has been discharged, the other application being C.A.N No. 3562 of 2000 filed by the opposite party for variation of the interim orders granted earlier has become infructuous and is disposed of accordingly.

No costs.

30. Since the subject matter of C.R No. 626 of 2000 heard along with this matter is same and parties therein were represented by the same set of counsel, this order will also govern the C.R No. 626 of 2000 and the same is discharged accordingly vacating all interim orders earlier passed.

C.A.N No. 3562 of 2000 filed in C.R No. 626 of 2000 is also disposed of as the said application has also become infructuous.

No costs.

Both the applications disposed of.

PPB