Full Judgment Text
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 4747 OF 2008
(Arising out of SLP (C) No.4765 of 2005)
Gulbarga University … Appellant
Versus
Mallikarjun S. Kodagali & Anr. … Respondents
J U D G M E N T
S.B. Sinha, J.
1. Leave granted.
2. Application of Section 14 of the Limitation Act, 1963 in a
proceeding under Section 34 of the Arbitration and Conciliation Act,
1996 (for short, ‘the Act’) is in question in this appeal which arises out of
a judgment and order dated 31.1.2005 passed by the High Court of
Karnataka at Bangalore in Miscellaneous First Appeal No.717 of 2004
whereby and whereunder the objection filed by the appellant herein
under Section 34 of the Act was held to be barred by limitation.
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3. Bereft of all unnecessary details, the fact of the matter is as under :
The parties hereto entered into a contract of construction of an
indoor stadium on or about 21.5.1993. The said contract contained a
clause pertaining to resolution of dispute between the parties by the
Superintending Engineer, PWD, Gulbarga contained in clause 30 of the
contract, which reads as under :
“The decision of the Superintending Engineer
of the Gulbarga Circle for the time being shall
be final, conclusive, and binding on all parties
to the contract upon all questions relating to the
meaning of the specifications, designs,
drawings and instructions herein before
mentioned and as to the quality of
workmanship or material used on the work, or
as to any other question, claim, right, matter, or
thing whatsoever, in any way arising out of, or
relating to the contract, esigns, drawings,
specifications, estimates, instructions, orders or
those conditions or otherwise concerning the
works or the execution, or, failure to execute
the same, whether arising during the progress
of the work, or after the completion or
abandonment thereof in case of dispute arising
between the contractor and Gulbarga
University.”
The parties filed their claims and counter claims before the said
authority. A purported award was passed in terms thereof on or about
30.7.1999. However, a copy thereof was not supplied to the respondent.
Respondent filed a writ petition before the High Court of Karnataka for
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issuance of a writ of or in the nature of mandamus directing the said
authority to supply it a copy of the said award. The writ petition was
filed on 17.2.2000. It was allowed by an order dated 13.6.2000 whereby
and whereunder the Superintending Engineer was directed to furnish a
copy of his decision to the respondent. Pursuant thereto, the same was
furnished on 19.8.2000.
Treating the said award to be one made under the Act as also on
the premise that no objection thereto was filed by the appellants in the
court of Principal Civil Judge within the period prescribed for
questioning the validity thereof and, thus, became an executable decree,
an execution application was filed on or about 18.9.2000. An objection
thereto was filed by the appellant herein purported to be under Section 47
of the Code of Civil Procedure. The said objection was dismissed. A
Revision Application was filed thereagainst and by a judgment and order
dated 30.11.2001, it was held by the High Court that the said clause does
not constitute an arbitration agreement.
A special leave petition was filed thereagainst by the respondent
and in a decision of Three Judge Bench of this Court, since reported in
Mallikarjun v. Gulbarga University [(2004) 1 SCC 372], the decision of
the High Court was reversed holding that ‘clause 30’ constituted an
arbitration agreement. This Court, in support of the said decision,
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noticed an earlier decision of this Court in Bharat Bhushan Bansal v.
U.P. Small Industries Corporation Limited [(1999) 2 SCC 166], stating :
15. A bare comparison of clause 30 of the
“
contract agreement involved in the present
matter and clauses 23 and 24 involved in
Bharat Bhushan Bansal case would show that
they are not identical. Whereas clause 30 of the
agreement in question provides for resolution
of the dispute arising out of the contract by
persons named therein; in terms of clause 24,
there was no question of decision by a named
person in the dispute raised by the parties to the
agreement. The matters which are specified
under clauses 23 and 24 in Bharat Bhushan
Bansal case were necessarily not required to
arise out of the contract, but merely claims
arising during performance of the contract.
Clause 30 of the agreement in the present case
did provide for resolution of the dispute arising
out of the contract by the Superintending
Engineer, Gulbarga Circle, Gulbarga. For that
reason, the case relied upon by the learned
counsel for the respondent is distinguishable.
16. Once clause 30 is constituted to be a valid
arbitration agreement, it would necessarily
follow that the decision of the arbitrator named
therein would be rendered only upon allowing
the parties to adduce evidence in support of
their respective claims and counter-claims as
also upon hearing the parties to the dispute. For
the purpose of constituting the valid arbitration
agreement, it is not necessary that the
conditions as regards adduction of evidence by
the parties or giving an opportunity of hearing
to them must specifically be mentioned therein.
Such conditions, it is trite, are implicit in the
decision-making process in the arbitration
proceedings. Compliance with the principles of
natural justice inheres in an arbitration process.
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They, irrespective of the fact as to whether
recorded specifically in the arbitration
agreement or not are required to be followed.
Once the principles of natural justice are not
complied with, the award made by the arbitrator
would be rendered invalid. We, therefore, are of
the opinion that the arbitration clause does not
necessitate spelling out of a duty on the part of
the arbitrator to hear both parties before
deciding the question before him. The
expression “decision” subsumes adjudication of
the dispute. Here in the instant case, it will bear
repetition to state, that the disputes between the
parties arose out of a contract and in relation to
matters specified therein and, thus, were
required to be decided and such decisions are
not only final and binding on the parties, but
they are conclusive which clearly spells out the
finality of such decisions as also their binding
nature.
17. A clause which is inserted in a contract
agreement for the purpose of prevention of
dispute will not be an arbitration agreement.
Such a provision has been made in the
agreement itself by conferring power upon the
Engineer-in-Charge to take a decision
thereupon in relation to the matters envisaged
under clauses 31 and 32 of the said agreement.
Clauses 31 and 32 of the said agreement
provide for a decision of the Engineer-in-
Charge in relation to the matters specified
therein. The jurisdiction of the Engineer-in-
Charge in relation to such matters are limited
and they cannot be equated with an arbitration
agreement. Despite such clauses meant for
prevention of dispute arising out of a contract,
significantly, clause 30 has been inserted in the
contract agreement by the parties.
18. The very fact that clause 30 has been
inserted by the parties despite the clauses for
prevention of dispute is itself a pointer to the
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fact that the parties to the contract were ad
idem that the dispute and differences arising out
of or under the contract should be determined
by a domestic tribunal chosen by them.”
Appellant thereafter filed an application in terms of Section 34 of
the Act before the Principal Civil Court on 8.12.2003. The same was
held to be barred by limitation. An appeal preferred thereagainst by the
appellant before the High Court has been dismissed by reason of the
impugned judgment, stating :
“The learned counsel for the respondent has
drawn our attention to the decision reported in
AIR 2001 SC 4010 in the case of UNION OF
INDIA v. M/S POPULKAR
CONSTRUCTIONS COMPANY. In the said
decision, the Apex Court has clearly laid down
that the provisions of Section 5 of Limitation
Act are not applicable to an application filed
challenging the award under Section 34 and as
such there was no scope for assessing
sufficiency of the cause for the delay beyond
and period prescribed in the proviso to Section
34.
In the light of this judgment and in the facts and
circumstances of the case as adverted to above,
we are of the clear view that the petition filed
before the Court below under Section 34 was
clearly barred by time and the findings arrived
at and conclusions reached by the Court below
while dismissing the petition on the ground,
does not call for any interference as it does not
suffer from any infirmity in law.”
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Dr. M.P. Raju, learned counsel appearing on behalf of the
appellant, would contend that the earlier decision of this Court in Union
of India v. M/s. Popular Constructions Company [AIR 2001 SC 4010],
whereupon reliance has been placed by the High Court has since been
revisited by this Court in State of Goa v. Western Builders [(2006) 6
SCC 239], holding :
“14. The question is whether Section 14 of the
Limitation Act has been excluded by this
special enactment i.e. the Arbitration and
Conciliation Act, 1996. Section 43 of the
Arbitration and Conciliation Act, 1996 clearly
says that the Limitation Act, 1963 shall apply to
arbitration as it applies to the proceedings in
the court.
15. Therefore, general proposition is by virtue
of Section 43 of the Act of 1996 the Limitation
Act, 1963 applies to the Act of 1996 but by
virtue of sub-section (2) of Section 29 of the
Limitation Act, if any other period has been
prescribed under the special enactment for
moving the application or otherwise then that
period of limitation will govern the proceedings
under that Act, and not the provisions of the
Limitation Act. In the present case under the
Act of 1996 for setting aside the award on any
of the grounds mentioned in sub-section (2) of
Section 34 the period of limitation has been
prescribed and that will govern. Likewise, the
period of condonation of delay i.e. 30 days in
the proviso.
16. But there is no provision made in the
Arbitration and Conciliation Act, 1996 that if
any party has bona fidely prosecuted its remedy
before the other forum which had no
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jurisdiction then in that case whether the period
spent in prosecuting the remedy bona fidely in
that court can be excluded or not. As per the
provision, sub-section (3) of Section 34 which
prescribes the period of limitation (3 months)
for moving the application for setting aside the
award before the court then that period of
limitation will be applicable and not the period
of limitation prescribed in the Schedule under
Section 3 of the Limitation Act, 1963. Thus, the
provision of moving the application prescribed
in the Limitation Act, shall stand excluded by
virtue of sub-section (2) of Section 29 as under
this special enactment the period of limitation
has already been prescribed. Likewise the
period of condonation of delay i.e. 30 days by
virtue of the proviso.
17. Therefore, by virtue of sub-section (2) of
Section 29 of the Limitation Act what is
excluded is the applicability of Section 5 of the
Limitation Act and under Section 3 read with
the Schedule which prescribes the period for
moving application.
18. Whenever two enactments are overlapping
each other on the same area then the courts
should be cautious in interpreting those
provisions. It should not exceed the limit
provided by the statute. The extent of exclusion
is, however, really a question of construction of
each particular statute and general principles
applicable are subordinate to the actual words
used by legislature.”
Referring to Popular Construction (supra) and National
Aluminimum Co. Ltd. v. Pressteel & Fabrications (P) Ltd. [(2004 (1)
SCC 540], it was held :
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“ 25. Therefore, in the present context also it is
very clear to us that there are no two opinions
in the matter that the Arbitration and
Conciliation Act, 1996 does not expressly
exclude the applicability of Section 14 of the
Limitation Act. The prohibitory provision has
to be construed strictly. It is true that the
Arbitration and Conciliation Act, 1996
intended to expedite commercial issues
expeditiously. It is also clear in the Statement
of Objects and Reasons that in order to
recognise economic reforms the settlement of
both domestic and international commercial
disputes should be disposed of quickly so that
the country’s economic progress be expedited.
The Statement of Objects and Reasons also
nowhere indicates that Section 14 of the
Limitation Act shall be excluded. But on the
contrary, intendment of the legislature is
apparent in the present case as Section 43 of the
Arbitration and Conciliation Act, 1996 applies
the Limitation Act, 1963 as a whole. It is only
by virtue of sub-section (2) of Section 29 of the
Limitation Act that its operation is excluded to
that extent of the area which is covered under
the Arbitration and Conciliation Act, 1996. Our
attention was also invited to the various
decisions of this Court interpreting sub-section
(2) of Section 29 of the Limitation Act with
reference to other Acts like the Representation
of the People Act or the provisions of the
Criminal Procedure Code where separate period
of limitation has been prescribed. We need not
overburden the judgment with reference to
those cases because it is very clear to us by
virtue of sub-section (2) of Section 29 of the
Limitation Act that the provisions of the
Limitation Act shall stand excluded in the Act
of 1996 to the extent of area which is covered
by the Act of 1996. In the present case under
Section 34 by virtue of sub-section (3) only the
application for filing and setting aside the
award a period has been prescribed as 3 months
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and delay can be condoned to the extent of 30
days. To this extent the applicability of Section
5 of the Limitation Act will stand excluded but
there is no provision in the Act of 1996 which
excludes operation of Section 14 of the
Limitation Act. If two Acts can be read
harmoniously without doing violation to the
words used therein, then there is no prohibition
in doing so.”
The ratio laid down in the said decision has since been reiterated in
Union of India & Anr. v. Bhavna Engineering Co. [2007 (5) RAJ 458],
stating :
“This Court in a recent judgment rendered in
State of Goa Vs. Western Builders, (2006)
6 SCC 239, held that Section 14 of
the Limitation Act, 1963 is applicable in
the Arbitration and Conciliation proceedings.
Having gone through the various facts, we are
of the view that the mistake committed by the
appellant in approaching the Madhya
Pradesh High Court and the Bombay
High Court is bona fide. We, therefore,
condone the delay. In the facts of this
case and in the interest of justice, we,
however, think it proper that the Section
34 Application pending before the Additional
District Judge, Gwalior be transferred to the
Bombay High Court. The application will be
decided on merits expeditiously. Parties are at
liberty to urge all the contentions before that
Court.”
There cannot be any doubt whatsoever that in terms of sub-section
(2) of Section 34 of the Act, an arbitral award may be set aside only if
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one of the conditions specified therein is satisfied. Sub-section (3) of
Section 34 provides for the period of limitation within which an
application under Section 34 of the Act is to be filed. The proviso
appended thereto empowers the court to entertain an application despite
expiry of the period of limitation specified therein, namely, three months.
No provision, however, exists as regards application of Section 14 of the
Limitation Act. This Court, as noticed hereinbefore in Western Builders
opined that sub-section (2) of Section 29 thereof would apply to an
arbitration proceedings and consequently Section 14 of the Limitation
Act would also be applicable. We are bound by the said decision. Once
it is held that the provisions of Section 14 of the Limitation Act, 1963
would apply, it must be held that the learned Trial Judge as also the High
Court has committed an error in not applying the said provisions.
The question, however, as to whether the period spent by the
appellant in prosecuting the aforementioned proceedings should be
excluded or not is a matter which must fall for decision before the
Principal Civil Court. The necessary corollary of the aforementioned
finding is that as to whether the appellant had been prosecuting, with due
diligence another proceeding or not would fall for consideration before
the Principal Civil Court.
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The impugned judgment of the High Court, therefore, cannot be
sustained. It is set aside accordingly. The matter is remitted to the
Principal Civil Court for consideration of the matter afresh in the light of
observations made hereinbefore. The appeal is allowed accordingly.
However, in the facts and circumstances of this case, there shall be no
order as to costs.
………………………….J.
[S.B. Sinha]
………………………….J.
[Cyriac Joseph]
New Delhi;
August 1, 2008