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State Of Jharkhand And Others v. Hindustan Construction Company Limited .
Factual and Procedural Background
On 10-1-2013 the Supreme Court referred the dispute between the present parties to arbitration by Hon’ble Mr. Justice S.B. Sinha (Retd.), requesting an expeditious conclusion and directing that the arbitral award be filed in this Court. Justice Sinha delivered his award on 16-10-2015 and transmitted a copy to the Supreme Court.
The appellants, however, filed objections to the award under Section 34 of the Arbitration and Conciliation Act, 1996 before the competent civil court. Conversely, the respondents filed an affidavit dated 16-6-2016 in the Supreme Court seeking a judgment in terms of the award, asserting that this Court alone is competent to make the award a rule of the court because it had directed the filing of the award.
Legal Issues Presented
- Whether the Supreme Court can entertain an application to make an arbitral award the rule of the court when it had retained seisin over the arbitral proceedings.
Arguments of the Parties
Respondents’ Arguments
- Because the arbitrator was expressly directed to file the award in the Supreme Court, only this Court has jurisdiction to pronounce judgment on the award.
- Relied on McDermott International Inc. v. Burn Standard Co. Ltd. (2005) 10 SCC 353 and State of Rajasthan v. Nav Bharat Construction Company (2010) 2 SCC 182, where the Supreme Court accepted jurisdiction in similar circumstances.
Appellants’ Arguments
- The right of appeal under Section 37 of the 1996 Act is a valuable right and should not be curtailed by the Supreme Court assuming original jurisdiction over objections to the award.
- Contended that the referral order did not reserve supervisory control sufficient to convert the Supreme Court into a “court” under Section 2(1)(e) of the Act.
- Cited Bharat Coking Coal Ltd. v. Annapurna Construction and State of W.B. v. Associated Contractors (2015) 1 SCC 32, the latter holding that the Supreme Court is not a “court” for the purposes of the 1996 Act even where it retains seisin over arbitral proceedings.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| McDermott International Inc. v. Burn Standard Co. Ltd., (2005) 10 SCC 353 | Where the arbitrator is directed to file the award in the Supreme Court, objections and applications to make the award a rule of the court must be filed in the Supreme Court. | Relied on by respondents to claim exclusive Supreme Court jurisdiction. |
| State of Rajasthan v. Nav Bharat Construction Company, (2010) 2 SCC 182 | Affirmed the McDermott principle that the Supreme Court may both entertain objections and make the award the rule of the court when the award is filed before it. | Cited as supportive authority for respondents’ position. |
| Bharat Coking Coal Ltd. v. Annapurna Construction | Emphasised the litigant’s valuable right to appeal and cautioned courts against assuming jurisdiction that curtails that right. | Invoked by appellants to resist Supreme Court’s original jurisdiction over the award. |
| State of W.B. v. Associated Contractors, (2015) 1 SCC 32 | Held that the Supreme Court is not a “court” under Section 2(1)(e) of the 1996 Act even when it appoints an arbitrator and retains seisin. | Highlighted by appellants; the Court acknowledged that this judgment conflicts with McDermott/Nav Bharat. |
| State of M.P. v. Saith and Skelton (P) Ltd., (1972) 1 SCC 702 | Earlier view under the 1940 Act that the Supreme Court could be a “civil court” when it retained seisin over arbitration. | Mentioned as a precedent doubted by Associated Contractors. |
| Guru Nanak Foundation v. Rattan Singh and Sons, (1981) 4 SCC 634 | Same line of authority as Saith and Skelton regarding Supreme Court’s capacity as “court” under the 1940 Act. | Also doubted by Associated Contractors; forms part of the conflict prompting referral. |
Court's Reasoning and Analysis
The Court compared two divergent lines of authority. The first, exemplified by McDermott and Nav Bharat, recognises Supreme Court jurisdiction to convert an award into a decree when it ordered filing of the award. The second, culminating in Associated Contractors, denies such jurisdiction under the 1996 Act, emphasising that doing so would extinguish statutory appeal rights and that the Supreme Court is not a “court” under Section 2(1)(e).
After noting that the respondents grounded their claim squarely on McDermott/Nav Bharat and the appellants relied on Associated Contractors/Bharat Coking Coal, the Court observed an unresolved conflict in precedent. Because the issue directly affects the availability of statutory appeals and the delineation of jurisdiction between the Supreme Court and subordinate courts, the Bench concluded that a definitive pronouncement from a larger Bench is necessary.
Holding and Implications
ORDER: The matter is referred to a larger Bench to decide whether the Supreme Court can entertain an application to make an arbitral award the rule of the court when it retains seisin over the arbitration.
Immediate Effect: No decision on the merits of the award or the Section 34 objections was rendered; the Registry is directed to place the case before the Chief Justice of India for appropriate orders constituting a larger Bench.
Broader Implications: The forthcoming larger-Bench decision will clarify the Supreme Court’s original jurisdiction in post-award proceedings under the 1996 Act and determine whether parties may lose their statutory appeal rights when the Supreme Court had earlier intervened in the arbitral process.
S. Abdul Nazeer, J.— By an order dated 10-1-2013, this Court had referred the matter for adjudication to the Hon'ble Justice S.B Sinha, retired Judge of this Court. The learned arbitrator was requested to conclude the arbitration proceedings expeditiously. It was further observed that the award shall be filed before this Court. The learned arbitrator passed an award on 16-10-2015 and a copy of the award was sent to this Court. Admittedly, the appellants have challenged the said award by filing a petition under Section 34 of the Arbitration and Conciliation Act, 1996 before the civil court. The respondents have filed an affidavit dated 16-6-2016 requesting this Court to pronounce the judgment in terms of the award.
2. The learned counsel for the respondents submits that since the arbitrator was directed to file his award in this Court, the application for making the award a rule of the court must be filed in this Court and that this Court alone has the jurisdiction to pronounce the judgment in terms of the award. In this connection, he has relied on a three-Judge Bench judgment of this Court in McDermott International Inc. v. Burn Standard Co. Ltd. McDermott International Inc. v. Burn Standard Co. Ltd., 2005 10 SCC 353, and a two-Judge Bench judgment in State of Rajasthan v. Nav Bharat Construction Company (2) State of Rajasthan v. Nav Bharat Construction Company 2, 2010 2 SCC 182.
3. On the other hand, the learned Senior Counsel appearing for the appellant submits that right to appeal is a valuable right and unless there exists cogent reasons, a litigant should not be deprived of the same. If this Court decides the objections to the award, the parties will lose their right of appeal. It is further submitted that while referring the matter to arbitration, this Court had not retained control of the proceedings of the arbitrator. In this connection, he has relied on the decisions of this Court in Bharat Coking Coal Ltd. v. Annapurna Construction Bharat Coking Coal Ltd. v. Annapurna Construction, 2008 6 SCC 732 and State of W.B v. Associated Contractors State of W.B v. Associated Contractors, 2015 1 SCC 32.
4. In Nav Bharat Construction Company, this Court while following a three-Judge Bench judgment in McDermott International Inc. has held that since the arbitrator was directed to file the award in this Court, an application to make the award the rule of the court, has to be filed in this Court. It has been held in para 11 thus: (Nav Bharat Construction Co. case)
“11. From the judgment of this Court dated 4-10-20055, it has been made clear by this Court in the operative part of the same, as noted hereinearlier, that the award that would be passed by the umpire must be filed in this Court and secondly, it was clarified in the judgment itself that this was not a case of a new reference but a continuation of the earlier proceeding and thus the Act shall continue to apply. In McDermott International Inc., the three-Judge Bench decision of this Court clearly observed that since the arbitrator was directed to file his award in this Court, the objections as well as the entertainability of the application of the appellant for making the award a rule of the court must be filed in this Court alone and, therefore, this Court has the jurisdiction to entertain the application of the appellant and also the objections filed by the respondent.”
(emphasis supplied)
5. In Bharat Coking Coal Ltd., this Court has held that (at) the court ordinarily must reserve right of a party to prefer an appeal. A right to appeal is a valuable right and unless there exists cogent reasons, a litigant should not be deprived of the same. It was further held that jurisdiction cannot be assumed by the court even by consent of the parties.
6. In Associated Contractors a three-Judge Bench of this Court, after taking note of some of the previous judgments of this Court, has held that the Supreme Court cannot be considered to be a court within the meaning of Section 2(1)(e) of the 1996 Act even if it retains seisin over the arbitral proceedings. In this judgment, this Court has doubted the view taken in State of M.P v. Saith and Skelton (P) Ltd. State of M.P v. Saith and Skelton P Ltd., 1972 1 SCC 702 and Guru Nanak Foundation v. Rattan Singh and Sons Guru Nanak Foundation v. Rattan Singh and Sons, 1981 4 SCC 634 that where an arbitrator was appointed by the Supreme Court itself and the Supreme Court retains seisin over the arbitration proceedings, the Supreme Court would be “court” for the purpose of Section 2(c) of the 1940 Act. It has been observed thus: (Associated Contractors case)
“20. … Secondly, under the 1940 Act, the expression “civil court” has been held to be wide enough to include an appellate court and, therefore would include the Supreme Court as was held in the two judgments aforementioned under the 1940 Act. Even though this proposition itself is open to doubt, as the Supreme Court exercising jurisdiction under Article 136 is not an ordinary appellate court, suffice it to say that even this reason does not obtain under the present definition, which speaks of either the Principal Civil Court or the High Court exercising original jurisdiction. Thirdly, if an application would have to be preferred to the Supreme Court directly, the appeal that is available so far as applications under Sections 9 and 34 are concerned, provided for under Section 37 of the Act, would not be available. Any further appeal to the Supreme Court under Article 136 would also not be available.”
(emphasis supplied)
7. We are of the view that there is a difference of opinion in relation to entertainability of an application by this Court for making the award as rule of the court. The matter is, therefore, referred to a larger Bench for decision of the following question:
“Whether this Court can entertain an application for making the award as rule of the court, even if it retains seisin over arbitral proceedings?”
8. The Registry is directed to place the matter before the Hon'ble the Chief Justice of India for appropriate orders.
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