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TMI Blog2016 (7) TMI 582X X X X Extracts X X X X X X X X Extracts X X X X ..... racts: viz. (1) a Contract for works and services and (2) a Contract for equipment and spares. Both these contracts were awarded to the respondent - Heavy Energy Corporation Ltd. which is also a Government of India company. The contracts contained a Clause that provided for adjudication of disputes between the parties by way of arbitration. Disputes having actually arisen in relation to the two contracts, the same were referred for resolution in terms of the "permanent in-house administrative machinery" set up by the Government. Claims and counter claims were made by the two corporations against each other which finally culminated in the making of two awards both dated 28.02.1997 under which respondent No.1 was held entitled to a sum of Rs. 16,87,61,981.11/-, while the appellant was awarded Rs. 56,05,000/-. Both the parties were, however, dissatisfied with the awards which they challenged in appeals filed before the Law Secretary, Department of Legal Affairs, Ministry of Law and Justice in terms of the in-house mechanism provided by the Government. While Appeal No.67 of 1998 filed before the Law Secretary pertained to the contract for supply of equipment, Appeal No.64 of 1999 perta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er dated 4.08.2000 passed in the suit restrained the implementation/execution of awards passed by the Appellate Authority. The appellant's case is that it was at that stage that the defendant-respondents herein moved an application under Order 7, Rule 11 (d) of the Code of Civil Procedure, 1908 (for short, "the CPC") praying for rejection of the plaint in the suit filed by the appellant. The defendant claimed that the suit was barred in view of the existence of a specially prescribed procedure for resolving disputes in arbitration proceedings between the two Government corporations. It was contended that in the light of the said procedure, neither party to the dispute was entitled to take recourse to proceedings in any Court without the permission of the Committee on Disputes. 7. The appellant opposed the prayer for rejection of the plaint inter alia on the ground that no permission to file a suit or other proceedings was required as the subject dispute also involved respondent No.2 who was not a party to the arbitration agreement or the proceedings. By an order dated 10.07.2007 a learned Single Judge of the High Court allowed the application filed by the defendants-respondents an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it. It was further held that once the parties have subjected themselves to permanent machinery for redressal of dispute between public sector undertakings, then the mechanism prescribed therein should be followed and, therefore, the suit in question could not have been filed without clearance of the Committee of Disputes. By merely noting the contention of the appellant that the root of the dispute is violation of Clause 3 of the terms of the contracts, it cannot be said that the learned Single Judge has decided disputed question of facts. It has merely taken note of the appellant's own case in stating that the key players are the two public sector undertakings which have entered into the contract in question with each other, and therefore, the special procedure prescribed for such disputes should have been followed. Consequently, the learned Single Judge rightly held that the plaint was liable to be rejected, inter alia, for that reason." 10. The present appeal calls in question the correctness of the above judgments and orders. 11. Appearing on behalf of the appellant, Mr. P.S. Patwalia, learned senior counsel argued that the view taken by the High Court was legally unsustainab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amework of the two enactments, yet the efficacy of the adjudication could not be doubted. He urged that even when the adjudication by the Arbitrator under the special mechanism did not tantamount to a decree enforceable in a Court of law, the fact that both the corporations were owned by the Government was sufficient by itself to facilitate recovery of the amount payable to one by the other and thereby effectuate the execution of the award by way of administrative action. 13. We have given our anxious consideration to the submissions made at the Bar. Before we deal with the contentions urged at the Bar, we need to advert to the historical backdrop in which the special mechanism came to be prescribed by the Government. 14. Commercial disputes between public sector enterprises inter se as well as between the public sector enterprises and the Government departments were in the ordinary course settled through arbitration by Government Officers or good offices of empowered government agencies like Bureau of Public Enterprises. Department of legal affairs however submitted a note dated 8th May, 1987 on the subject which was considered by a Committee of Secretaries in its meeting held o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or undertakings and public sector enterprises to take resort to the said procedure also remained in force, instances of public sector undertakings resorting to legal proceedings instead of complying with those instructions came to the notice of this Court in Oil and Natural Gas Commission and Anr. v. Collector of Central Excise 1995 Supp (4) SCC 541 in which this Court taking note of such legal proceedings at considerable public expense resulting in waste of valuable Court time directed Government of India to set up a Committee consisting of representatives from the Ministry of Industry and Commerce, Bureau of Public Enterprises and the Ministry of Law to monitor disputes inter se Public Sector Undertakings and with the Government to ensure that no litigation came to the Courts and Tribunals without the matter having being first examined by the Committee for grant or refusal of clearance for litigation. This Court made it obligatory for every Court and every Tribunal where such a dispute is raised to demand a clearance from the Committee in case it has not been so pleaded, and also directed that in the absence of such a clearance the proceedings would not be carried forward. It was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... if made in the case of the Union of India by its Secretary, Ministry of Finance Department of Revenue, and in the case of Public Sector Undertakings by its Chairman, Managing Director or chief Executive, as the case may be. It is only after such reference to the High Power Committee is made in the manner indicated that the operation of the order or proceedings under challenge shall be suspended till the High Power Committee resolves the dispute or gives clearance to the litigation. If the High Power Committee is unable to resolve the matter for reasons to be recorded by it, it shall grant clearance for the litigation." (emphasis supplied) 17. In Oil and Natural Gas Corporation Ltd. v. City and Indust. Dev. Corpn., Maharashtra and Ors. (2007) 7 SCC 39 this Court ordered the constitution of another Committee to look into the disputes between Central Government and State Government entities. Then came Commissioner of Income Tax, Delhi-VI v. Oriental Insurance Co. Ltd. (2008) 9 SCC 349 in which this Court while clarifying its earlier order in Oil and Natural Gas Commission v. Collector of Central Excise, (2004) 6 SCC 437 observed that there was no rigid time frame prescribed b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , we find merit in the submission advanced before us by learned Attorney General that time has come to revisit the orders passed by the three Judge Bench of this Court in the case of Oil & Natural Gas Commission v. Collector of Central Excise (supra)." 19. The matter was accordingly referred to a larger bench to reconsider the earlier decisions directing constitution of the COD. The matter was eventually heard and decided by a Five Judge Bench of this Court in Electronics Corporation of India Ltd. v. Union of India, (2011) 3 SCC 404. This Court after noticing various flaws in the working of the Committee of Disputes ordered recall of its previous orders passed by it in the following words: "6......By Order dated 11.9.1991, reported in 1992 Supp (2) SCC 432 (ONGC and Anr. v. CCE), this Court noted that "Public Sector Undertakings of Central Government and the Union of India should not fight their litigations in Court". Consequently, the Cabinet Secretary, Government of India was "called upon to handle the matter personally". 7. This was followed by the order dated 11.10.1991 in ONGC-II case (supra) where this Court directed the Government of India "to set up a Committee c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... als causing loss of revenue. For example, in many cases of exemptions, the Industry Department gives exemption, while the same is denied by the Revenue Department. Similarly, with the enactment of regulatory laws in several cases there could be overlapping of jurisdictions between, let us say, SEBI and insurance regulators. Civil appeals lie to this Court. Stakes in such cases are huge. One cannot possibly expect timely clearance by CoD. In such cases, grant of clearance to one and not to the other may result in generation of more and more litigation. The mechanism has outlived its utility. In the changed scenario indicated above, we are of the view that time has come under the above circumstances to recall the directions of this Court in its various Orders reported as 1995 Supp (4) SCC 541 dated 11.10.1991, (ii) (2004) 6 SCC 437 dated 7.1.1994 and (iii) (2007) 7 SCC 39 dated 20.7.2007. 10. In the circumstances, we hereby recall the following Orders reported in: (i) 1995 Supp (4) SCC 541 dated 11.10.1991 (ii) (2004) 6 SCC 437 dated 7.1.1994 (iii) (2007) 7 SCC 39 dated 20.7.2007" (emphasis supplied) 20. The Government of India had, in the intervening period, consolidated into ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of India, Ministry of Industries and Public Enterprises, Department of Public Enterprises revising the guidelines further and deleting from the earlier guidelines Para 13 that required clearance from the Committee of Disputes. 22. The net effect of the above can be summarized as under: (i) The Permanent Machinery of Arbitration was put in place as early as in March, 1989, even before ONGC II was decided on 11th October, 1991. (ii) The Permanent Machinery of Arbitration was outside the statutory provision then regulating arbitrations in this country namely Arbitration Act, 1940 (10 of 1940). (iii) The award made in terms of the Permanent Machinery of Arbitration being outside the provisions of the Arbitration Act, 1940 would not constitute an award under the said legislation and would therefore neither be amenable to be set aside under the said statute nor be made a rule of the court to be enforceable as a decree lawfully passed against the judgment debtor. (iv) The Committee on disputes set up under the orders of this Court in the series of orders passed in ONGC cases did not prevent filing of a suit or proceedings by one PSE/PSU against another or by one ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccount on the breach of Clause 3 thereof. The appellant also sought a declaration that the respondent company was not entitled to claim any relief under the said contract nor was respondent No.2 entitled to do so and that the so called arbitral award was vitiated on the face of record hence liable to be set aside. That such a suit could be filed but could not be proceeded with till such time the COD granted permission is also beyond dispute as on the date of the institution of the suit the direction of this Court in ONGC group of cases still held the field. Such permission could be obtained within 30 days which was not sacrosanct but the institution of the suit itself could not be faulted as a litigant was in terms of the direction of this Court entitled to institute the proceedings to save limitation. The High Court has, all the same, rejected the plaint on the ground that permission from COD was not obtained. In doing so the High Court obviously understood the direction of this Court to mean as though absence of such permission was a fatal defect which it was not. The orders of this Court to which we have made a reference earlier unequivocally make it clear that filing of the sui ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt Machinery of Arbitration was outside the statute regulating arbitration in this country and was not, therefore, executable in law. What he argued was that since both sides to the disputes were government corporations the Government could adopt administrative mechanism for recovering the amount held payable to the respondent. That does not, in our opinion, answer the question. Remedies which are available to the Government on the administrative side cannot substitute remedies that are available to a losing party according to the law of the land. The appellant has lost before the arbitrators in terms of the Permanent Machinery of Arbitration and is stoutly disputing its liability on several grounds. The dispute regarding liability of the appellant under the contract, therefore, continues to loom large so long as it is not resolved finally and effectually in accordance with law. No such effective adjudication recognized by law has so far taken place. That being so, the right of the appellant to demand such an adjudication cannot be denied simply because it happens to be a Government owned company for even when the appellant is a government company, it has its legal character as an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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