TMI Blog1995 (5) TMI 264X X X X Extracts X X X X X X X X Extracts X X X X ..... stood incorporated in each of them, by agreement of parties. The Orissa Government which rescinded both the contracts - one in the year 1974 and another in the year 1975, it appears, did not concede to the petitioner's claim, exceeding rupees one crore made in relation to each of them. This situation appears to have led the petitioner to institute two separate proceedings under the Principal Act in the Court of Sub - Judge, Bhuvaneshwar--the Court of Sub-Judge' seeking appointment of arbitrators to decide the disputes relating to his claims made in respect of the said two contracts. The appointment of a separate arbitrator for deciding each of the said disputes, it appears, was made by the Court of Sub - Judge in the year 1981. But, in the year 1982 when the Principal Act, as applicable to the State of Orissa, was amended by the Arbitration (Orissa Amendment) Act, 1982 -- the 1982 Amendment Act, providing a forum of Arbitration Tribunal for deciding arbitral disputes arisen or arising from contracts as those of the petitioner, a controversy appears to have cropped up, as to whether the arbitrators appointed by the Court of Sub-Judge, in the proceedings before it, had to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Sub-Judge and unsuccessfully challenged upto this Court by the Orissa Government, is under execution in an execution proceeding before the Court of Sub-Judge. Thus, when, the amount payable under one award which was made a 'Rule of Court' was pending realisation before the Executing Court and another arbitral award which was made a 'Rule of Court' by the Court of Sub-Judge, was pending consideration by this Court in a Civil Appeal, the State Government, it is said, promulgated the Arbitration (Orissa Amendment) Ordinance, 1991, amending the Principal Act as amended by the earlier amendment Acts, in its application to the State of Orissa. However, that Ordinance came to be replaced by the 1991 Amendment Act. As the 1991 Amendment Act has in effect nullified the aforesaid two awards made in favour of the petitioner by two Special Arbitration Tribunals constituted by the State Government under the 1984 Amendment Act, even after each of them had been made a 'Rule of Court' and directed the petitioner to get the arbitral disputes raised by him, resolved afresh by the Arbitration Tribunal constituted under the Principal Act as stood amended by the 1982 Amen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is the reason, it is said, as to why the petitioner has filed the writ petition to challenge the constitutionality of the 1991 Amendment Act. The petitioners in the present Writ Petitions have since challenged the constitutionality of the 1991 Amendment Act, which is found in the notification published in the Orissa Gazette Extra-Ordinary on 22nd January 1991, that Notification itself, for the sake of convenience, is reproduced: No.1117-Legis.- The following Act of the Orissa Legislative Assembly having been assented to by the President on the 22nd January, 1992 is hereby published for general information. ORISSA ACT 3 OF 1992 THE ARBITRATION (ORISSA SECOND AMENDMENT) ACT, 1991 An Act to amend the Arbitration Act, 1940 in its application to the State of Orissa. Be it enacted by the Legislature of the State of Orissa in the Forty-second Year of the Republic of India as follows:- 1. (i) This Act may be called the Arbitration (Orissa Second Amendment) Act, 1991. (2). It shall be deemed to have come into force on the 24th day of September, 1991. 2. In the Arbitration Act, 1940 in its application to the State of Orissa (hereinafter referred to as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Act as amended by this Act. By order of the Governor Sd/- P.K.PANIGRAHI Secretary to Government. The 1991 Amendment Act, as seen from its provisions, makes it abundantly clear that every reference made to a Special Arbitration Tribunal between 26th March, 1983 and 24th January, 1990 in respect of a dispute involving a claim of rupees one crore or above, if such claim was more than double the amount agreed to by the parties in the contract out of which such dispute arose, becomes invalid and a fresh reference of such arbitral dispute shall be made to the Arbitration Tribunal within the stipulated period, notwithstanding anything to the contrary in the Principal Act or in any award made by a Special Arbitration Tribunal in relation to any dispute or any judgment, decree or order passed by any court in relation to any such dispute or award and also notwithstanding whether such award of the Special Arbitration Tribunal has been or has to be, made the `Rule of Court' under Section 17 of the Principal Act. Arguments addressed before us against the constitutionality of the said 1991 Amendment Act by Shri Vinoo Bhagat and Shri R.F. Nariman, learned counsel for the petitione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he awards of Special Arbitration Tribunals did not merge in the judgments and decrees of Courts, when they were made 'Rules of Court', can it be said that the 1991 Amendment Act which nullifies the judgments and decrees of Courts by which the awards of the Special Arbitration Tribunals, were made 'Rules of Court' is enacted by the Orissa State Legislature by encroaching upon the judicial power of the State exclusively vested in Courts as sentinals of Rule of Law, a basic feature of our Constitution, and hence is unconstitutional? 5. If the awards of Special Arbitration Tribunals did not merge in the judgments and decrees of Courts, can it not be said that the 1991 Amendment Act which nullifies the awards of the Special Arbitration Tribunals, even where such awards were made 'Rules of Court', is enacted by the Orissa State Legislature by encroaching upon the judicial power of the State exclusively vested in Courts as sentinals of Rule of Law, a basic feature of our Constitution, and hence is unconstitutional? 6. Is the nullification brought about by the 1991 Amendment Act of awards made by Special Arbitration Tribunals on arbitral disputes referred to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te legislature in making a law within its competence can never make such law unconstitutional, is well settled. In K. Nagaraj Ors. v. State of Andhra Pradesh Anr., (1985) 2 SCR 579, while dealing with the mala fides attributed to a legislature in which it had competence to make the law, this Court said thus: The legislature, as a body, cannot be accused of having passed a law for an extraneous purpose. If no reasons are so stated as appear from the provisions enacted by it. Its reasons for passing a law or those that are stated in the Objects and Reasons. Even assuming that the executive, in a given case, has an ulteriror motive in moving a legislation, that motive cannot render the passing of the law mala fide. This kind of 'transferred malice' is unknown in the field of legislation. Hence, we have no hesitation in finding that the 1991 Amendment Act cannot be held to be unconstitutional because of the ulterior motive and the mala fides attributed to the Orissa State Legislature. Point -3: This point concerns merger of awards of Special Arbitration Tribunals in the judgments and decrees of Courts when such awards are made 'Rules of Court'. Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring that the awards shall be final and binding on the parties and persons claiming under them, respectively. No doubt, it is open to any of the parties to the award, if so chosen, to cause the Special Arbitration Tribunal, as provided for under section 14 of the Principal Act, to file such award in court for making it a `Rule of Court', by its judgment and decree to be rendered or made under section 17 of the Principal Act. Such Court is a Civil Court having jurisdiction to decide the questions forming the subject-matter of the reference if the same had been the subject-matter of a suit, as becomes clear from the definition clause (c) of Section 2 of the Principal Act. What is of importance and requires our examination is, whether such Court when makes an award of the Special Arbitration Tribunal filed before it, a `Rule of Court' by its judgment and decree, as provided under Section 17 of the Principal Act, does such award of the Special Arbitration Tribunal merge in the judgment and decree, as argued on behalf of the petitioners. We find it difficult to accede to the argument. What cannot be overlooked is, that the award of a Special Arbitration Tribunal, as that of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... incompetent. It further observed that if the award is final and binding on the parties, it can hardly be said that it is a waste paper unless it is made a `Rule of Court'. Hegde, J. who agreed with the above observations of Sikri, J. (as His Lordship then was) while speaking for Bachawat, J. also, observed that the arbitration has the first stage which commences with arbitration agreement and ends with the making of the award, and then a second stage which relates to the enforcement of the award. He also observed that it was one thing to say that a right is not created by the award but it is an entirely different thing to say that the right created cannot be enforced without further steps. Therefore, our answer to the point is that the awards of Special Arbitration Tribunals did not merge in judgments and decrees of the Courts even though the Courts by their judgments and decrees made such awards `Rules of Court' for their enforceability through the Courts availing their machinery used for execution of their decisions, that is, their own judgments and decrees. Point-4 It is true, as argued on behalf of the petitioners, that a Legislature has no legislative power to r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eir judgments and decrees is not their judicial power exercised in rendering judgments and decrees, as Civil Courts exercise their powers vested in them for resolving disputes between parties. To be precise, judgments and decrees made by Civil Courts in making the awards of the Special Arbitration Tribunals the `Rules of Court' for the sole purpose of their enforceability through the machinery of Court, cannot make such judgments and decrees of Civil Court, the decisions rendered by Civil Courts in exercise of judicial power of the State exclusively invested in them under our Constitution. Thus, when the judgments and decrees made by Civil Courts in making the awards of Special Arbitration Tribunals `Rules of Court' are not those judgments and decrees of Courts made in exercise of judicial power of State vested in them under our Constitution, the 1991 Amendment Act when nullifies the judgments and decrees of Courts by which awards of Special Arbitration Tribunals are made `Rules of Court', cannot be regarded as that enacted by the Orissa State Legislature encroaching upon the judicial powers of State exercisable under our Constitution by Courts as sentinals of Rule of L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it applies to the State of Orissa was amended with effect from 26.3.1983 by the Arbitration (Orissa Amendment) Act 1984, whereby, a proviso to sub-section (1) of the said section was inserted to the effect that reference to arbitration of disputes specified in the said sub-section involving claims of rupees one crore or above may be made to a Special Arbitration Tribunal comprising one or more retired High Court Judges, as may be constituted by the State Government from time to time. In the course of operation of this proviso it was experienced that a tendency has developed among the Contractors to seek constitution of Special Arbitration Tribunals by inflating their claims to rupees one crore and above, inter alia, to avoid depositing the security money required for reference to the Arbitration Tribunal. Therefore, the said proviso was deleted with effect from 25.1.1990 by the Arbitration (Orissa Amendment) Act 1989 (Orissa Act 1 of 1990). While so deleting the proviso, the cases which were pending before the Special Arbitration Tribunal for disposal, whereas the cases in which award was already passed were left unaffected in view of prospective operation of the amendment. Lat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consisting of three members and referring certain disputes for decision by those Arbitration Tribunals. When 1984 Amendment Act was enacted by the State Legislature, it provided for referring certain disputes involving claims of ₹ 1 crore or above, to Special Arbitration Tribunals to be constituted by the State Government comprised of one or more retired High Court Judges, from time to time. It also provided for transfer of disputes involving claims of ₹ 1 crore or above pending before the Arbitration Tribunals constituted under the 1982 Amendment Act to the Special Arbitration Tribunal to be constituted by the State Government under 1984 Amendment Act. One of the provisions in the 1984 Amendment Act read thus: The business of the Arbitration Tribunal or Special Arbitration Tribunal shall be conducted in such manner as the Tribunal may determine and awards made and signed shall be supported by reasons. From what we have stated hereinbefore, it becomes obvious that the Special Arbitration Tribunals had been constituted by the State Government in accordance with the 1984 Amendment Act to adjudicate upon or decide the disputes referred to them under that Act, by ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1983 and 24th day of February, 1990 forbids the making of reference under sub-section (1) of Section 42-A of the Principal Act, involving a claim of ₹ 1 crore or more unless the amount agreed to by the parties in the Contract exceeds the amount of such claim. Then, coming to Section 3 it declares that all the awards made by the Special Arbitration Tribunals on references made to it under the 1984 Amendment Act during the period adverted to under Section 2 invalid even where those awards were made `Rules of Court', i.e., judgments and decrees of Courts. Further, that Section requires the making of fresh references to arbitration of such dispute to the Arbitration Tribunals constituted under the 1982 Amendment Act. Thus, Sections 2 and 3 of the 1991 Amendment Act seek to nullify the awards of Special Arbitration Tribunals, made on disputes referred to them from the 26th day of March, 1983 to 24th day of February, 1990 under the 1984 Amendment Act becomes obvious. Thus, the impugned 1991 Amendment Act seeks to nullify the awards made by the Special Arbitration Tribunals constituted under the 1984 Amendment Act, in exercise of the power conferred upon them by that Act ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
