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TMI Blog2022 (6) TMI 97X X X X Extracts X X X X X X X X Extracts X X X X ..... r. V. Shyamohan, AOR, Mr. Surya Prakash, Adv., Mr. Akshat Gogna, Adv., Ms. Astu Khandelwal, Adv., Mr. Siddharth, AOR, Mr. Mohammed Sadique T.A., AOR, Mr. Anu K. Joy, Adv., Mr. Alim Anvar, Adv., Mr. Abraham C. Mathews, Adv., Mr. Merry S. Mathew, Adv., Mr. Hitesh Kumar, Adv., Mr. Akhileshwar Jha, Adv., Mr. K.M. Kavitha, Adv., Mr. Sanand Ramakrishnan, AOR, Mr. John Mathew, AOR, Mr. Aljo K. Joseph,Adv., Ms. Shelna K., Adv., Mr. Ritesh Kumar Chowdhary, AOR, Mr. Rabin Majumder, AOR, Mr. Roy Abraham Adv, Mr. Himinder Lal, AOR, Mr. Prashanto Chandra Sen, Sr. Adv., M/S.KMNP Law, AOR. JUDGMENT B.R. GAVAI, J. 1. Two important questions of law, with regard to the legislative competence of the Kerala State Legislature to enact the Kerala Revocation of Arbitration Clauses and Reopening of Awards Act, 1998 (hereinafter referred to as the "State Act") and as to whether the State Act encroaches upon the judicial power of the State, are involved in the present appeals. * BACKGROUND: 2. The High Court of Kerala at Ernakulam, by the impugned judgment dated 9th July 2013 delivered in O.P. No.4206 of 1998 and companion matters, has held the State Act to be beyond the legislative competence of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pening of Awards Act, 1998 Preamble .............. ........... Section 1 Short title, extent, commencement and application (1) This Act may be called the Kerala Revocation ofArbitration Clauses and Reopening of Awards Act, 1998. (2) It extends to the whole of the State of Kerala. (3) It shall be deemed to have come into force on the14th day of November, 1997. (4) It shall apply to all agreements executed in termsof the local competitive bidding specification. Section 2 Definitions (1) In this Act, unless the context otherwiserequires, (a) "agreement" means an agreementexecuted in terms of the local competitive bidding specification for various works of the Government of Kerala; (b) "local competitive bidding specification" means the local competitive bidding specification adopted by the Government in their Order G.O. (Ms) No. 3/81/I&R dated the 20th January, 1981. (2) Words and expressions used but not defined inthis Act and defined in (a) the Arbitration Act, 1940 (Central Act10 of 1940); or (b) the Arbitration and Conciliation. Act,1996 (Central Act 26 of 1996), in relation to arbitration proceedings commenced on or after the 25th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecree or order of any court or other authority or in any agreement or other instrument, where it appears to the Government that any award passed is not in accordance with the terms of the agreement or there was failure to produce relevant data or other particulars before the Arbitrator before passing the award or the award passed is of unconscionable amounts, they may file appeal against such award within ninety days of the date of commencement of this Act. Section 6 Procedure before court For the removal of doubts, it is hereby clarified that the provisions of the Code of Civil Procedure, 1908 (Central Act 5 of 1908), shall apply to all proceedings before court and to all appeals under this Act. Section 7 Arbitration Act not to apply The provisions of this Act shall apply to any proceedings instituted under this Act notwithstanding anything inconsistent herein with the provisions of the Arbitration Act, 1940 (Central Act 10 of 1940) or the Arbitration and Conciliation Act, 1996 (Central Act 26 of 1996) or any other law for the time being in force. Section 8 Repeal and saving (1) The Kerala Revocation of Arbitration Clauses andReopening of Awards ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hin a period of 90 days from the date of commencement of the State Act, where it appears to the State Government that any award passed is not in accordance with the terms of the agreement or there was failure to produce relevant data or other particulars before the Arbitrator before passing the award or the award passed is of unconscionable amounts. Again, this is notwithstanding anything contained in the 1940 Act or in the 1996 Act or in the 1963 Act or in any other law for the time being in force or in any judgment, decree or order of any court or other authority or in any agreement or other instrument. 8. Section 6 of the State Act clarifies that the provisions of the Code of Civil Procedure, 1908 (hereinafter referred to as "CPC") shall apply to all proceedings before the court and to all appeals under the State Act. 9. Section 7 of the State Act provides that the provisions of the State Act shall apply to any proceedings instituted under the State Act notwithstanding anything inconsistent therein with the provisions of the 1940 Act or the 1996 Act or any other law for the time being in force. 10. Subsection (1) of Section 8 of the State Act repeals the Kerala Rev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ability of Article 253 of the Constitution of India would arise. As such, the Union Parliament had an overriding legislative power to make any law for the whole or any part of the territory of India. Once a Central Legislation referable to Article 253 of the Constitution of India comes into being, then the State Act cannot be said to be valid only in view of the Presidential assent received under Article 254 (2) of the Constitution of India; (iii) That the executive power of the Union is coextensive with the legislative power of the Parliament under Article 73(1)(b) of the Constitution of India. As such, the 1996 Act is enacted by the Central Legislation in order to give effect to the executive power of the Government of India, to give effect to the decisions taken at the international conference. As such, if it is held that the Presidential assent under Article 254 (2) of the Constitution of India would validate the State Act, then the very purpose of Article 253 of the Constitution of India would be destroyed; (iv) That LCBS can be traced only to entries in the Union List, in particular, to Entry 37, as also, Entries 10 and 14 of List I of the Seventh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s an agreement between the parties, whereby they have agreed to refer their dispute to arbitration. It is therefore submitted that what has been done by the State Act is a cancellation of contract by a statute and as such, the State Act or a part thereof would be referable to Entry 7 of List III of the Seventh Schedule to the Constitution of India. 16. Shri Gupta submitted that the rest of the legislation deals with the consequences of cancellation of the Arbitration clause in the Agreement. It is submitted that on cancellation of an agreement, subsection (2) of Section 3 of the State Act provides an opportunity to any party to the agreement to file a suit in a competent civil court. He submitted that Section 4 of the State Act extends the period of limitation for filing of the suit. Section 5 of the State Act enables the State Government to challenge the award on various grounds stated therein, within a specified period. It is, therefore, submitted that the State Act is referable to Entries 7 and 13 of List III of the Seventh Schedule to the Constitution of India and as such, within the legislative competence of the State Legislature. 17. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e three Lists of the Seventh Schedule to the Constitution of India contain a number of entries, some overlapping is bound to happen. In such a situation, the doctrine of pith and substance is required to be applied to determine as to which entry does a given piece of legislation relate to. He submitted that regard must be had to the enactment as a whole, to its main object and to the scope and effect of its provisions. He submitted that when a legislation is traceable, in pith and substance, to an entry with regard to which a State is competent to legislate, then incidental and superficial encroachments on the other entry will have to be disregarded. Reference in this respect is made to the judgments of this Court in the cases of Hoechst Pharmaceutical Ltd. and Others v. State of Bihar and Others [(1983) 4 SCC 45] and State of West Bengal v. Kesoram Industries Ltd. and Others [(2004) 10 SCC 201. It is therefore submitted that since the impugned legislation is in pith and substance a legislation in the field covered by Entries 7 and 13 of List III of the Seventh Schedule to the Constitution of India, the same would not invalidate the State Act. 21. Shr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o give effect to binding obligation are covered by the said Article. 25. Shri Gupta further submitted that the Model Law is a suggested pattern for law makers which only recommends the practices to be adopted in the international arbitration and not for the domestic arbitration and as such, it cannot be held that it has any binding obligation insofar as domestic arbitration is concerned. 26. Shri Shishodia, learned Senior Counsel submitted that in the earlier statutory scheme prior to the 1996 Act, the 1940 Act governed the domestic arbitration, whereas the 1937 Act and the 1961 Act governed international commercial arbitrations. He submitted that in the 1996 Act, the domestic arbitrations are governed by Part I, whereas Part II governs international commercial arbitrations with separate specific provisions for Geneva Convention Awards and New York Convention Awards. He submitted that however, even in the 1996 Act, the historical as well as contemporary distinction between an international commercial arbitration and domestic arbitration remains. In this respect, he relies on the judgment of this Court in the case of Fuerst Day Lawson Limited v. Jindal Exports Limited ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 37 deals with foreign loans. He submitted that since the State Act attempts to deal with the loans taken from the World Bank, it will be an encroachment on the legislative field reserved for the Union Legislature. It is therefore submitted that the State Act is enacted by the State Legislature in respect of entries which are exclusively within the jurisdiction of the Central Legislation and as such, beyond the competence of the State Legislature. He submitted that the question of Presidential assent under Article 254 (2) of the Constitution of India would arise only when the legislation is in respect of items covered in List III, i.e., the Concurrent List. Since the State Act deals with the entries exclusively in List I, the Presidential assent would be of no consequence to save the State Act. 31. Shri Venugopal submitted that the 1996 Act is clearly referable to the decision taken at international conference, i.e., the General Assembly of United Nations held on 11th December 1985. In support of the said submission, he relies on the judgment of this Court in the case of Maganbhai Ishwarbhai Patel Etc. v. Union of India and Another [(1970) 3 SCC 400].& ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... become arbitrary and unreasonable. He submitted that much earlier to the enactment of the State Act, not only the awards have become final but the amount awarded has already been paid to the claimants. As such, if the State Act is permitted to operate now, it will amount to arbitrariness and unreasonableness. He therefore submitted that the present appeals deserve to be dismissed. 36. Shri P.C. Sen, learned Senior Counsel appearing on behalf of some of the respondents submitted that the State Act has the effect of depriving the respondents' settled right of property under Article 300A of the Constitution of India which has been acquired as per law. He submitted that the awards passed, create a right in the property and are enforceable when the same are made a decree of the court. In this regard, he relies on the judgment of this Court in the case of Satish Kumar and Others v. Surinder Kumar and Others [[1969] 2 SCR 244]. 37. Shri Sen further submitted that in the present case, the awards have been acted upon and payments have been made. Therefore, vested rights have been crystalized in favour of the respondents. He submitted that such vested ri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he judgments of this Court in the cases of Saverbhai Amaidas v. State of Bombay [1955] 1 SCR 799] and T. Barai v. Henry Ah Hoe and Another [(1983) 1 SCC 177]. 42. Smt. Padmanabhan, learned counsel appearing on behalf of some of the respondents submitted that the assent of the President of India under Article 254(2) of the Constitution of India is not a matter of idle formality. She submitted that unless the State satisfies that relevant material was placed before the President of India and he was made aware about the grounds on which the Presidential assent was sought, the Presidential assent would not save the State Act from being invalid. In this respect, she relies on the judgment of this Court in the case of Gram Panchayat of Village Jamalpur v. Malwinder Singh and Others [(1985) 3 SCC 661]. 43. Smt. Padmanabhan submitted that the State Act is also arbitrary and violative of Article 14 of the Constitution of India. She submitted that the State Act treats unequals equally by failing to make a distinction between the cases where there is a fraud and where there is no fraud. In this respect, she relies on the judgment of this Court in the case of State of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce in this respect is placed on the judgments of this Court in the cases of T. Barai (supra) and Mar Appraem Kuri Company Limited and Another (supra). 48. Shri Mathew further submitted that only when the proceedings went against the State, they illegally enacted the State Act in order to either deny payments or delay them by compelling the respondents to face or to undergo an altogether different remedy for the very same cause of action. In this regard, he relies on the judgments of this Court in the cases of State of Tamil Nadu and Others v. K. Shyam Sunder and Others [(2011) 8 SCC 737] and Deep Chand and Others v. State of Uttar Pradesh and Others [[1959] Supp (2) SCR 8]. 49. Shri Kuriakose Varghese, learned counsel appearing on behalf of some of the respondents submitted that apart from making the bald allegation that there was collusion between the contractors and the officials, no material is placed on record. He submitted that the State Act which has been enacted, in the absence of sufficient material, would not be sustainable in law. Reliance in this respect is placed on the judgment of this Court in the case of Ladli Construction Co. (P) Ltd. v. Punjab Police Housin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the CPC provides for the plenary jurisdiction of the civil courts to decide disputes of civil nature unless excluded by law. He submitted that so long as the parties are governed by an arbitration agreement, the civil courts, though having jurisdiction to entertain civil suits in respect of disputes arising out of the contract between the parties, are required to refer the disputes, if any, to arbitration under Sections 8 and 11 of the 1996 Act and Sections 20 and 34 of the 1940 Act. However, once the arbitration agreement stands cancelled, all fetters would stand removed and the civil courts will have the jurisdiction to entertain the disputes. It is submitted that the argument with regard to the forum to which an appeal would lie, being not provided is without substance. He submitted that by virtue of Section 6 of the State Act, CPC is applicable to all the proceedings and an appeal will lie to the court, based on the court which is rendering the judgment or award and/or passing the decree on award. As such, the argument regarding vagueness is without substance. 55. Insofar as the argument with regard to the State having the right to pick and choose ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Organization. 13. Participation in international conferences,associations and other bodies and implementing of decisions made thereat. 14. Entering into treaties and agreements withforeign countries and implementing of treaties, agreements and conventions with foreign countries. ........ 37. Foreign loans. .........." 59. It will also be apposite to refer to Entry 13 of List III of the Seventh Schedule to the Constitution of India, which reads thus: "Seventh Schedule (Article 246) List III - Concurrent List ............ 13. Civil procedure, including all matters included in the Code of Civil Procedure at the commencement of this Constitution, limitation and arbitration. .........." 60. Article 253 of the Constitution of India reads thus: "253. Legislation for giving effect to international agreements. - Notwithstanding anything contained in the foregoing provisions of this Chapter, Parliament has power to make any law for the whole or any part of the territory of India for implementing any treaty, agreement or convention with any other country or countries or any decision made at any international conference, association or other body." 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at to validate such a law, it is necessary to reserve the same for consideration of the President of India and obtain his assent. When such an assent is obtained, the provisions of the State Law or Act so enacted would prevail in the State concerned, notwithstanding its repugnancy with an earlier Parliamentary enactment made on the subject. It is not in dispute that in the present case also, the State Act was reserved for consideration of the President of India and the assent of the President of India has been obtained. As such, the State Act so enacted would prevail in the State of Kerala. 63. It will further be pertinent to note that in the case of MP Rural 2012, the M.P. Madhyastham Adhikaran Adhiniyam, 1983 (State enactment) provided for mandatory statutory arbitration in the State of M.P. irrespective of the arbitration agreement in respect of works contracts in the State of M.P. or its instrumentalities. An argument was sought to be made on behalf of the claimants that the State Act was repugnant to the 1996 Act and that in view of Section 85 of the 1996 Act, the M.P. Act, 1983 stood impliedly repealed. There was a difference of opinion between the tw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 the AC Act, 1996. Therefore, there is no substance in the argument of repugnancy and is accordingly rejected." 64. Since Gyan Sudha Mishra, J. disagreed with A.K. Ganguly, J. in the said case, the matter was referred to a larger Bench. 65. The Bench consisting of three learned Judges in the case of MP Rural 2018, agreed with the view expressed by Ganguly, J. 66. It could be seen that this Court in the case of G.C. Kanungo (supra) as well as in the case of MP Rural 2018, has held that the source of the enactment of the 1940 Act, 1996 Act so also the State Acts legislated by Orissa and MP Legislatures is Entry 13 of List III of the Seventh Schedule to the Constitution of India. Ordinarily, if there is any conflict between the Central law and the State law, in view of clause (1) of Article 254 of the Constitution of India, the Central law would prevail. However, in view of clause (2) of Article 254 of the Constitution of Indi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Article 254 is an exception to clause (1). If law made by the State Legislature is reserved for consideration and receives assent of the President though the State law is inconsistent with the Central Act, the law made by the Legislature of the State prevails over the Central law and operates in that State as valid law. If Parliament amends the law, after the amendment made by the State Legislature has received the assent of the President, the earlier amendment made by the State Legislature, if found inconsistent with the Central amended law, both Central law and the State Law cannot coexist without colliding with each other. Repugnancy thereby arises and to the extent of the repugnancy the State law becomes void under Article 254(1) unless the State Legislature again makes law reserved for the consideration of the President and receives the assent of the President. Full Bench of the High Court held that since U.P. Act 57 of 1976 received the assent of the President on 30121976, while the Central Act was assented on 991976, the U.P. Act made by the State Legislature, later in point of time it is a valid law." (emphasis supplied) 51. The petitioners have a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ernational conferences, associations and other bodies and implementing of decisions made thereat. Entry 14 deals with entering into treaties and agreements with foreign countries and implementing of treaties, agreements and conventions with foreign countries. Entry 37 deals with foreign loans. 70. It will be apposite to refer to the following observations of the Constitution Bench in the case of Kesoram Industries Ltd. and Others (supra). In the said case, R.C. Lahoti, J., speaking for the majority, has observed thus: "31. Article 245 of the Constitution is the fountain source of legislative power. It provides - subject to the provisions of this Constitution, Parliament may make laws for the whole or any part of the territory of India, and the legislature of a State may make laws for the whole or any part of the State. The legislative field between Parliament and the legislature of any State is divided by Article 246 of the Constitution. Parliament has exclusive power to make laws with respect to any of the matters enumerated in List I in the Seventh Schedule, called the "Union List". Subject to the said power of Parliament, the legislature of any State has power to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stpossible interpretation. This is because, to quote V. Ramaswami, J., the allocation of the subjects to the lists is not by way of scientific or logical definition but by way of a mere simplex enumeratio of broad categories. A power to legislate as to the principal matter specifically mentioned in the entry shall also include within its expanse the legislations touching incidental and ancillary matters. (5) Where the legislative competence ofthe legislature of any State is questioned on the ground that it encroaches upon the legislative competence of Parliament to enact a law, the question one has to ask is whether the legislation relates to any of the entries in List I or III. If it does, no further question need be asked and Parliament's legislative competence must be upheld. Where there are three lists containing a large number of entries, there is bound to be some overlapping among them. In such a situation the doctrine of pith and substance has to be applied to determine as to which entry does a given piece of legislation relate. Once it is so determined, any incidental trenching on the field reserved to the other legislature is of no consequence. The court has to look ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers (supra), if the State is competent to legislate on the subject, any incidental encroachment on any item in List I would not affect the State Legislature. In any case, as already observed hereinabove, this Court, in the cases of G.C. Kanungo (supra) and MP Rural 2018, has specifically held that the 1940 Act, the 1996 Act and the State Acts legislated by the Orissa and M.P. Legislatures are referable to Entry 13 of List III of the Seventh Schedule to the Constitution of India. As such, in view of the Presidential assent under clause (2) of Article 254 of the Constitution of India, the State Legislature would prevail. 73. Shri Venugopal, learned Senior Counsel has strongly relied on paragraphs 234, 238, 239 and 293 in the case of Kesoram Industries Ltd. and Others (supra), in support of the proposition that the State Act is not within the legislative competence of the State Legislature, which read thus: "234. The Constitutionmakers found the need for powersharing devices between the Centre and the State having regard to the imperatives of the State's security and stability and, thus, propelled the thrust towards centralisation by using non obstante cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rcial arbitrations are concerned. It will further be relevant to refer to paragraphs (2) and (3) of the Statement of Objects and Reasons of the 1996 Act : "Statement of Objects and Reasons 1. ............... 2. The United Nations Commission on International Trade Law (UNCITRAL) adopted in 1985 the Model Law on International Commercial Arbitration. The General Assembly of the United Nations has recommended that all countries give due consideration to the said Model Law, in view of the desirability of uniformity of the law of arbitral procedures and the specific needs of international commercial arbitration practice. The UNCITRAL also adopted din 1980 a set of Conciliation Rules. The General Assembly of the United Nations has recommended the use of these Rules in cases where the disputes arise in the context of international commercial relations and the parties seek amicable settlement of their disputes by recourse to conciliation. An important feature of the said UNCITRAL Model Law and Rules is that they have harmonized concepts on arbitration and conciliation of different legal systems of the world and thus contain provisions which are designed for u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nced that the Model Law, together with the Convention on the Recognition and Enforcement of Foreign Arbitral Awards and the Arbitration Rules of the United Nations Commission on International Trade Law recommended by the General Assembly in its resolution 31/98 of 15 December 1976, significantly contributes to the establishment of a unified legal framework for the fair and efficient settlement of disputes arising in international commercial relations, 1. Requests the SecretaryGeneral to transmit the text of the Modern Law on International Commercial Arbitration of the United Nations Commission on International Trade Law, together with the travaux preparatoires from the eighteenth session of the Commission, to Governments and to arbitral institutions and other interested bodies, such as chambers of commerce; 2. Recommends that all States give due consideration to the Model Law on International Commercial Arbitration, in view of the desirability of uniformity of the law of arbitral procedures and the specific needs of international commercial arbitration practice." [emphasis supplied] 81. A perusal of the aforesaid Resolution would clearly reveal that what has been d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sposal of cases relating to environmental protection and conservation of forests and other natural resources including enforcement of any legal right relating to environment. The right to healthy environment has been construed as a part of the right to life under Article 21 by way of judicial pronouncements. Therefore, the Tribunal has special jurisdiction for enforcement of environmental rights." 84. At this juncture, it will be relevant to note that the Preamble to the Environment (Protection) Act, 1986 (hereinafter referred to as the "1986 Act") would itself reveal that it refers to the decision taken at United Nations Conference on the Human Environment held at Stockholm in June 1972, in which India participated and wherein, a decision was taken to take appropriate steps for the protection and improvement of human environment. It further states that it was considered necessary to implement the decisions aforesaid insofar as they relate to the protection and improvement of environment and the prevention of hazards to human beings and other living creatures. So also, the National Green Tribunal Act, 2010 (hereinafter referred to as the "NGT Act") refers to India bein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the date of the enactment of the State Act, the appeals preferred by the State under Section 39 of the 1940 Act were pending before the competent courts. 88. The appellants have heavily relied on the judgment of this Court in the case of G.C. Kanungo (supra), wherein this Court has observed thus: "15. 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 an award of an arbitrator, is, as we have already pointed out, a decision made by it on the claim or cause referred for its decision by way of arbitral dispute. When the court makes such award of a Special Arbitration Tribunal a "Rule of Court" by means of its judgment and decree, it is not deciding the claim or cause as it would have done, if it had come before it as a sui ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent 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. 16. 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. 17. It is true, as argued on behalf of the petitioners, that a legislature has no legislative power to render ineffective the earlier judicial decisions by making a law which simply declares the earlier judicial decisions as invalid or not binding, for such power if exercised would not be a legislative power exercised by it but a judicial power exercised by it encroaching upon the judicial power of the State exclusively vested in courts. The said argument advanced, since represents the correct and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch 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 sentinels of Rule of Law, a basic feature of our Constitution. Hence, the 1991 Amendment Act insofar as it nullifies judgments and decrees of courts by which awards of Special Arbitration Tribunals are made "Rules of Court", even where they are affirmed by higher courts, cannot be regarded as that made by the Orissa State Legislature transgressing upon the judicial power of State vested in courts as would make it unconstitutional." [emphasis supplie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the earlier judicial decisions by making a law which simply declares the earlier judicial decisions as invalid and not binding, for such powers, if exercised, would not be legislative power exercised by it, but judicial power exercised by it encroaching upon the judicial power of the State vested in a judicial tribunal as the Special Arbitration Tribunal under the 1984 Amendment Act. Moreover, where the arbitral awards sought to be nullified under the 1991 Amendment Act are those made by Special Arbitration Tribunals constituted by the State itself under the 1984 Amendment Act to decide arbitral disputes to which State was a party, it cannot be permitted to undo such arbitral awards which have gone against it, by having recourse to its legislative power for grant of such permission as could result in allowing the State, if nothing else, abuse of its power of legislation." [emphasis supplied] 91. The court further held that under the 1984 Amendment Act, the Special Arbitration Tribunals were constituted by the State itself to decide arbitral disputes. It held that the State was a party before such Tribunals and therefore, it cannot be permitted to undo such arbitral awards w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot passed in exercise of judicial power. However, the perusal of paragraph 17 in the case of G.C. Kanungo (supra) would reveal that this Court recorded the submissions made on behalf of the petitioners therein that, a Legislature has no legislative power to render ineffective the earlier judicial decisions by making a law which simply declares the earlier judicial decisions as invalid or not binding. It also recorded that if such a power is exercised, it will not be legislative power exercised by it but a judicial power, encroaching upon the judicial power of the State exclusively vested in courts. It further appears that various decisions of this Court were cited by the counsel for the petitioners therein, however, this Court did not find it necessary to refer to the said decisions, since this Court found that the said submissions represent a correct and wellsettled position in law. It will be worthwhile to note that in the said case, this Court was considering the provisions of the 1940 Act as against the provisions of the Orissa State Act. In the present case also, all the awards so also the judgments and decrees passed by the civil courts maki ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is in excess of, or not otherwise in accordance with the award. ................. 30. Grounds for setting aside award. -- An award shall not be set aside except on one or more of the following grounds, namely -- (a) that an arbitrator or umpire has misconducted himself or the proceedings; (b) that an award has been made after the issue of an order by the Court superseding the arbitration or after arbitration proceedings have become invalid under Section 35; (c) that an award has been improperly procured or is otherwise invalid." 96. A perusal of Section 15 of the 1940 Act would reveal that the court, by an order, may modify or correct an award, where it appears that a part of the award is upon a matter not referred to arbitration and such part can be separated from the other part and does not affect the decision on the matter referred. The Court may also modify or correct the award, where the award is imperfect in form, or contains any obvious error which can be amended without affecting such decision. The power under Section 15 of the 1940 Act could also be exercised, where the award contains a clerical mistake or an error arising from an accidental slip or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich is followed by a decree, does not exercise judicial power. The court is not supposed to act mechanically and be a PostOffice. 101. A Constitution Bench of this Court in the case of Harinagar Sugar Mills Ltd. v. Shyam Sundar Jhunjhunwala and Others [1962] 2 SCR 339], had an occasion to consider the scope of Section 111 of the Companies Act, 1956. It was sought to be urged before this Court that the authority of the Central Government under Section 111 of the Companies Act, 1956 was an administrative authority. Rejecting the said submission, J.C. Shah, J. observed thus: ".........But that in an appeal under Section 111 clause (3) there is a lis or dispute between the contesting parties relating to their civil rights, and the Central Government is invested with the power to determine that dispute according to law i.e. it has to consider and decide the proposal and the objections in the light of the evidence, and not on grounds of policy or expediency. The extent of the power which may be exercised by the Central Government is not delimited by express enactment, but the power is not on that account unrestricted. The power in appeal to order registration o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decision judicial. It is the manner in which the decision has to be arrived at which makes the difference, and the real test is: Is there any duty to decide judicially?" The Court also approved of the following test suggested in King v. London County Council [(1931) 2 KB 215, 233] by Scrutton, L.J.: "It is not necessary that it should be a court in the sense in which this Court is a court; it is enough if it is exercising, after hearing evidence, judicial functions in the sense that it has to decide on evidence between a proposal and an opposition; and it is not necessary to be strictly a court; if it is a tribunal which has to decide rights after hearing evidence and opposition, it is amenable to the writ of certiorari." In Bharat Bank Ltd., Delhi v. Employees [(1950) SCR 459] the question whether an adjudication by an Industrial Tribunal functioning under the Industrial Tribunals Act was subject to the jurisdiction of this Court under Article 136 of the Constitution fell to be determined: Mahajan, J. in that case observed: "There can be no doubt that varieties of Administrative Tribunals and Domestic Tribunals are known to exist in this country as well as in other countr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 102. It has been held by this Court that the restrictions which inhere the exercise of the power of the court also apply to the exercise of the appellate power by the Central Government. It has been held that the Central Government has to decide whether in exercising their power, the directors are acting oppressively, capriciously or corruptly, or in some way mala fide. The decision has manifestly to stand those objective tests, and has not merely to be founded on the subjective satisfaction of the authority deciding the question. It has been held that the very nature of the jurisdiction requires that it is to be exercised subject to the limitations which apply to the court under Section 155 of the Companies Act, 1956. It could be seen that this Court has held that since the dispute between the parties relates to the civil rights and the Act provides for a right of appeal and makes detailed provisions about hearing and disposal according to law, it is impossible to avoid the inference that a duty is imposed upon the Central Government in deciding the appeal to act judicially. 103. M. Hidayatullah, J., in a separate but concurring judgment, observed thus: "Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons. The Central Government by its order then directs that the shares be registered or need not be registered. The Central Government is also empowered to include in its orders, directions as to payment of costs or otherwise. The function of the Central Government is curial and not executive. There is provision for a hearing and a decision on evidence, and that is indubitably a curial function. Now, in its functions the Government often reaches decisions, but all decisions of the Government cannot be regarded as those of a tribunal. Resolutions of the Government may affect rights of parties, and yet, they may not be in the exercise of the judicial power. Resolutions of the Government may be amenable to writs under Articles 32 and 226 in appropriate cases, but may not be subject to a direct appeal under Article 136 as the decisions of a tribunal. The position, however, changes when Government embarks upon curial functions, and proceeds to exercise judicial power and decide disputes. In those circumstances, it is legitimate to regard the officer who deals with the matter and even Government itself as a tribunal. The officer who decides, may even be anonymous; but the decision is on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... charging any judicial function. Still it does not follow that every order of the Court merely for the reason that it is passed in the course of the realisation of the assets of the company must always be treated as merely an administrative one. The question ultimately depends upon the nature of the order that is passed. An order according sanction to a sale undoubtedly involves a discretion and cannot be termed merely a ministerial order, for before confirming the sale the Court has to be satisfied, particularly where the confirmation is opposed, that the sale has been held in accordance with the conditions subject to which alone the liquidator has been permitted to effect it, and that even otherwise the sale has been fair and has not resulted in any loss to the parties who would ultimately have to share the realisation. The next question is whether such an order could be classified as an administrative order. One thing is clear, that the mere fact that the order is passed in the course of the administration of the assets of the company and for realising those assets is not by itself sufficient to make it an administrative, as distinguished from a judicial order. For instance, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interests, even if they were not represented by the 1st respondent, the Court was bound to protect. If the sale of which confirmation was sought was characterised by any deviation from the conditions subject to which the sale was directed to be held or even otherwise was for a gross undervalue in the sense that very much more could reasonably be expected to be obtained if the sale were properly held in view of the figure of Rs 3,37,000 which had been bid by Nandlal Agarwalla, it would be the duty of the Court to refuse the confirmation in the interests of the general body of creditors and this was the submission made by the 1st respondent. There were thus two points of view presented to the Court by two contending parties or interests and the Court was called upon to decide between them. And the decision vitally affected the rights of the parties to property. In this view we are clearly of the opinion that the order of the Court was, in the circumstances, a judicial order and not an administrative one and was therefore not inherently incapable of being brought up in appeal. [emphasis supplied] 106. The Constitution Bench in the case of Shankarlal Aggarwala and Others (supra) held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ra), the Constitution Bench distinguished between the administrative and judicial powers of the court. This Court in paragraph 17 in the case of G.C. Kanungo (supra) rightly observed that the State Legislature has no legislative power to render ineffective the earlier judicial decisions by making a law. It cannot simply declare the earlier decisions invalid or not binding. However, observing this, in paragraph 18, this Court held that the power exercised by the court in making the awards of the Special Arbitration Tribunals the "Rules of Court", is not a judicial power. We are of the considered view that the aforesaid finding is not only per incuriam the provisions of the 1940 Act but also the two judgments of the Constitution Bench in the cases of Harinagar Sugar Mills Ltd. (supra) and Shankarlal Aggarwala and Others (supra). 109. A sevenJudge Bench of this Court in the case of Bengal Immunity Company Limited v. State of Bihar and Others [[1955] 2 SCR 603], was considering the question as to whether the majority decision in the case of State of Bombay and Another v. United Motors (India) Limited and Others [[1953] SCR 1069] laid down a correct law.&nb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... um of a statute or other binding authority'. (Young v. Bristol Aeroplane Co. Ltd. [(1944) 1 KB 718 : (1944) 2 All ER 293] ). Same has been accepted, approved and adopted by this Court while interpreting Article 141 of the Constitution which embodies the doctrine of precedents as a matter of law. In Jaisri Sahu v. Rajdewan Dubey [(1962) 2 SCR 558 : AIR 1962 SC 83] this Court while pointing out the procedure to be followed when conflicting decisions are placed before a bench extracted a passage from Halsbury's Laws of England incorporating one of the exceptions when the decision of an appellate court is not binding. 41. Does this principle extend and apply to a conclusion of law, which was neither raised nor preceded by any consideration. In other words can such conclusions be considered as declaration of law? Here again the English courts and jurists have carved out an exception to the rule of precedents. It has been explained as rule of subsilentio. "A decision passes subsilentio, in the technical sense that has come to be attached to that phrase, when the particular point of law involved in the decision is not perceived by the court or present to its mind." (Salmon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of a High Court is not in consonance with the views of this Court. It must immediately be clarified that the per incuriam rule is strictly and correctly applicable to the ratio decidendi and not to obiter dicta. It is often encountered in High Courts that two or more mutually irreconcilable decisions of the Supreme Court are cited at the Bar. We think that the inviolable recourse is to apply the earliest view as the succeeding ones would fall in the category of per incuriam." 112. The perusal of the judgment in the case of G.C. Kanungo (supra) would reveal that though the court has recorded the submissions of the counsel for the petitioners therein, that the Legislature has no power to render ineffective the earlier judicial decisions by making a law and though judgments were cited in support of the said proposition, the court did not consider it necessary to refer to the said decisions. However, without considering the provisions of the 1940 Act or the two judgments of the Constitution Bench in the cases of Harinagar Sugar Mills Ltd. (supra) and Shankarlal Aggarwala and Others (supra), it went on to hold that the powers exercised by a court while making an award "Rule of C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... error apparent on the face of an award which requires to be corrected, has always been a subjectmatter of discussion. An error of law on the face of the award would mean that one can find in the award or a document actually incorporated thereto stating the reasons for a judgment some legal propositions which are the basis of the award and which can be said to be erroneous. Documents not incorporated directly or indirectly into the award cannot be looked into for the purpose of finding out any alleged error. The courts are not to investigate beyond the award of the arbitrators and the documents actually incorporated therein and, therefore, when there would be no patent error on the face of the award, it would not be open for the court to go into the proceedings of the award. If the application for remittance filed by the claimants invoking jurisdiction of the court under Section 16 is examined from the aforesaid standpoint and if the order of the learned civil court, remitting Claim Item 1 is tested in the light of the discussions made above, the conclusion is irresistible that no case for remittance had been made out and the learned trial Judge exercised his discretion on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or twenty years after the period of the contract has come to an end. There have been cases where the appointment of an arbitrator has been sought, after the parties had settled the accounts and the party concerned had certified that he had no further claims against the other contracting party. In other words, there have been occasions when dead claims are sought to be resurrected. There have been cases where assertions are made of the existence of arbitration agreements when, in fact, such existence is strongly disputed by the other side who appears on issuance of notice. Controversies are also raised as to whether the claim that is sought to be put forward comes within the purview of the arbitration clause concerned at all. The Chief Justice has necessarily to apply his mind to these aspects before coming to a conclusion one way or the other and before proceeding to appoint an arbitrator or declining to appoint an arbitrator. Obviously, this is an adjudicatory process. An opportunity of hearing to both parties is a must. Even in administrative functions if rights are affected, rules of natural justice step in. The principles settled by Ridge v. Baldwin [(1963) 2 All ER 66 : 1964 A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on for separation of powers. 126.2. Independence of courts from the executive and legislature is fundamental to the rule of law and one of the basic tenets of Indian Constitution. Separation of judicial power is a significant constitutional principle under the Constitution of India. 126.3. Separation of powers between three organs- the legislature, executive and judiciary-is also nothing but a consequence of principles of equality enshrined in Article 14 of the Constitution of India. Accordingly, breach of separation of judicial power may amount to negation of equality under Article 14. Stated thus, a legislation can be invalidated on the basis of breach of the separation of powers since such breach is negation of equality under Article 14 of the Constitution. 126.4. The superior judiciary (High Courts and Supreme Court) is empowered by the Constitution to declare a law made by the legislature (Parliament and State Legislatures) void if it is found to have transgressed the constitutional limitations or if it infringed the rights enshrined in Part III of the Constitution. 126.5. The doctrine of separation of powers applies to the final judgments of the courts. The legislature ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. 121. We have already held that since the State Act is referable to Entry 13 of List III of the Seventh Schedule to the Constitution of India, it is within the competence of the State Legislature. The question that will have to be considered is whether it is an attempt to interfere with the judicial process. For that, we will have to consider the three questions framed by the Constitution Bench in the case of State of Tamil Nadu v. State of Kerala and Another (supra). A perusal of the various provisions of the State Act would clearly show that the State Act has been enacted since the State Government was aggrieved by various awards passed against it. It was therefore found expedient, in the public interest, to cancel the arbitration clause in the agreement, to revoke the authority of the arbitrators appointed thereunder and to enable the filing of appeals against the awards or decrees. As already discussed hereinabove, most of the awards were made "Rules of Court" prior to 1993. In many of the cases, appeals were also preferred by the State Government. As such, we find that the legislative prescriptions and legislative directions in the State ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is coextensive with its legislative powers laying conditions of service and rights accrued to or acquired by a citizen would be as much rights acquired under law and protected to that extent. The orders passed by the Government, from time to time beginning from February 1967 till 1985 and at any rate up to the passing of the Act, to meet the administrative exigencies and cater to the needs of public interest really and effectively provided sufficient legal basis for the acquisition of rights during the period when they were in full force and effect. The orders of the High Court as well as the Tribunal also recognised and upheld such rights and those orders attained finality without being further challenged by the Government, in the manner known to law. Such rights, benefits and perquisites acquired by the teachers concerned cannot be said to be rights acquired otherwise than in accordance with law or brushed aside and trampled at the sweet will and pleasure of the Government, with impunity. Consequently, we are unable to agree that the legislature could have validly denied those rights acquired by the appellants retrospectively not only depriving them of such rights but also enact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he submissions made on behalf of the parties with regard to other issues. * CONCLUSION : 127. In the result, we hold as under: (i) That the State Act in pith and substance is referable to Entry 13 of List III of the Seventh Schedule to the Constitution of India and not to the Entries 12, 13, 14 and 37 of List I of the Seventh Schedule nor to Article 253 of the Constitution of India. The State Act, therefore, is within the legislative competence of the State Legislature. In any case, in view of the Presidential assent under Article 254(2) of the Constitution of India, the State Act would prevail within the State of Kerala. The finding of the High Court of Kerala, to the contrary, is erroneous in law; (ii) That the finding in the case of G.C. Kanungo (supra) to the effect that the powers exercised by the courts in passing judgments and decrees for making the arbitration awards "Rule of Court" is not an exercise of judicial power, is per incuriam the provisions of the 1940 Act and the judgments of the Constitution Bench in the cases of Harinagar Sugar Mills Ltd. (supra) and Shankarlal Aggarwala and Others (supra); and (iii) That the High Court of Kerala is ri ..... X X X X Extracts X X X X X X X X Extracts X X X X
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