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Eastern Commercial Corporation Vs. State of Himachal Pradesh - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtHimachal Pradesh High Court
Decided On
Case NumberO.M.P. Nos. 56 and 99 of 1973
Judge
Reported inAIR1977HP74
ActsArbitration Act, 1940 - Sections 13, 31(3), 31(4) and 41
AppellantEastern Commercial Corporation
RespondentState of Himachal Pradesh
Appellant Advocate R.N. Malhotra and; P. Malhotra, Advs.
Respondent Advocate H.K. Paul, Asst. Adv. General
Cases ReferredDaulat Ram v. Shri Ram
Excerpt:
- t.u. mehta, j.1. by a previous order both these matters are ordered to 'be heard together.2. o.m.p. no. 56 of 1973 arises out of the interim order passed by the arbitrator on 29-3-1973 staying the recovery of the royalty amount of rs. 44,390.10 till the disposal of the arbitration proceedings between the parties pending before him. the case of the state which has felt aggrieved by this order is that the arbitrator has no jurisdiction to pass such interim order in the pending arbitration proceedings and, therefore, the above referred order of the arbitrator should be quashed under section 31 of the indian arbitration act, 1940.3. o.m.p. no. 99 of 1973 is also preferred by the state claiming for extension of time under section 28 of the arbitration act. this, prayer of the state for.....
Judgment:

T.U. Mehta, J.

1. By a previous order both these matters are ordered to 'be heard together.

2. O.M.P. No. 56 of 1973 arises out of the interim order passed by the arbitrator on 29-3-1973 staying the recovery of the royalty amount of Rs. 44,390.10 till the disposal of the arbitration proceedings between the parties pending before him. The case of the State which has felt aggrieved by this order is that the arbitrator has no jurisdiction to pass such interim order in the pending arbitration proceedings and, therefore, the above referred order of the arbitrator should be quashed under Section 31 of the Indian Arbitration Act, 1940.

3. O.M.P. No. 99 of 1973 is also preferred by the State claiming for extension of time under Section 28 of the Arbitration Act. This, prayer of the State for extension of time under Section 2-8 of the Arbitration Act is not resisted by the claimants and should, therefore, be allowed.

4. So far as O.M.P. No. 56 of 1973 is concerned, the claimants had raised a preliminary objection challenging the jurisdiction of this Court and contending that it was the High Court of Delhi which had jurisdiction to entertain such applications. Point arising out of this contention was referred to a Division Bench and the same now stands decided by the judgment of the Division Bench dated 13-12-1974.

5. In view of the above decision, the other contentions which are raised by tile parties now remain to be decided.

6. Before stating the contentions of the parties it would be necessary to state shortly the facts constituting the background of this dispute. The claimants are the forest lessees and had entered into a contract with the Forest Department of the State of Himachal Pradesh, This contract contained an arbitration clause which was in the following terms:--

'29. That if any question, difference or subject on whatsoever shall arise between the parties to these presents or their respective representatives or between one of the parties hereto and the representatives of the other of them touching these presents or any Clause or thing herein contained or the construction thereof or as to any matter in any way connected with or arising out of these presents or the operation thereof or the rights, duties, or liabilities of either parties then save in so far as the decision of any such question or difference or part thereof is already hereinbefore otherwise provided for and has been so decided, every such question, difference or objection including any question or difference as regards whether the decision of any particular matter has been otherwise provided for and/or whether it has been finally decided accordingly failing either of which whether the Arbitrator referred to below should decide it or whether the contract hereinbefore contained should be terminated or has been duly terminated and as regards rights and obligations of the parties as the result of such termination shall be referred for arbitration to the Deputy Commissioner. Sirmour District, Nahan or should he be unable or unwilling to act, to such Assistant as the said Deputy Commissioner shall appoint as sole arbitrator and his decision shall be final and binding and where the matter involves a claim for or the payment or recovery or deduction of money only the amount, if any, awarded in such arbitration shall be recoverable in respect of the matter so referred.'

7. Dispute has arisen between the parties with regard to this contract. According to the claimants the Forest Department of the State of Himachal Pradesh has committed breach of contract and, therefore, a sum of Rs. 1,00,000 and odd remains due to them on account of the breach of the contract. The defendant State claims royalty amount of Rs. 44,390.10 and sought to realise this amount by way of arrearg of rent revenue.

8. As the dispute as regards the damages claimed by the claimants arises between the parties, an application under Section 20 of the Act was moved before this Court by the claimants for filing in Court the arbitration agreement. This application was registered as C.O.P. No. 9 of 1969 and has been decided in favour of the claimants on 15-10-1970. The Court in that application also referred the dispute between the parties to the arbitration of Deputy 'Commissioner. Sirmour district at Nahan.

9. During the pendency of the proceedings before the Arbitrator the claimants moved an application for stay of the proceedings started for the recovery of the balance of royalty amount of Rupees 44,390.10. After hearing the parties the arbitrator allowed this stay application and granted a stay in the following terms:--

'It is, therefore, ordered that the recovery proceedings taking place before the Collector, Patiala, District Patiala in respect of the amount of Rs. 44,390.10 (Rupees forty-four thousand three hundred and ninety and paise ten only) are stayed till the disposal of the arbitration case.'

It is this order which the State has now challenged in these proceedings.

10. The learned Advocate for the State contended that neither under the Arbitration agreement between the parties, nor under any of the statutory provisions of the Arbitration Act, 1940, the arbitrator has got any power or jurisdiction to pass such interim orders and, therefore, this court exercising its jurisdiction under Section 31 of the Arbitration Act should set aside the said order.

11. As against this it is contended on behalf of the claimants that the arbitrator had implied jurisdiction to pass this order because, if he has jurisdiction to finally decide and settle the dispute between the parties, he should be presumed to have jurisdiction to pass all the orders which are ancillary to his main power. It was further contended on behalf of the claimants that Section 31 of the Arbitration Act has no application to the facts of the case because that section merely provides for the jurisdiction of the Court and does not speak about its powers and, therefore, even if it is found that the arbitrator had no jurisdiction to pass such orders this court can interfere with the arbitrator's order only when the matter comes before this court for the purpose of confirmation of the final award passed by him.

12. In view of these contentions the first question which arises to be considered is whether this court has got power and jurisdiction to interfere with the order passed by the arbitrator under Section 31 of the Act. This section is in the following terms:

'31. (1) Subject to the provisions of this Act, an award may be filed in any Court having jurisdiction En the matter to which the reference relates.

(2) Notwithstanding anything contained in any other law for the time being in force and save as otherwise provided in this Act, all questions regarding the validity, effect or existence of an award or an arbitration agreement between the parties to the agreement or persons claiming under them shall be decided by the Court in which the award under the agreement has been, or may be, filed, and by no other Court.

(3) All applications regarding the conduct of arbitration proceedings or otherwise arising out of such proceedings shall be made to the Court where the award has been, or may be filed, and to no other court

(4) Notwithstanding anything contained elsewhere in this Act or in any other law for the time being in force where in any reference any application under this Act has been made in a Court competent to entertain it, that Court alone shall have jurisdiction over the arbitration proceedings and all subsequent applications arising out of that reference and the arbitration proceedings shall be made in that Court and in no other Court.'

13. The Supreme Court had an occasion to consider these provisions of Section 31 in another context in the decision given in Kumbha Mawji v. Dominion of India reported in AIR 1953 SC 313. For the purpose of this matter we are concerned only with the interpretation of Sub-sections (3) and (4) of Section 31. With regard to these two sub-sections the Supreme Court has observed as under in the above referred decision:--

'Sub-section (3) is intended to provide that all applications regarding the conduct of arbitration proceedings or otherwise arising out of such proceedings are to be made only in one Court, and lays on the concerned party the obligation to do so. Then comes Sub-section (4), the object of which apparently is to go further than Sub-section (3), that is, not merely casting on the party concerned an obligation to file all applications in one Court but vesting exclusive jurisdiction for such applications in the Court in which the first application has been already made.'

Proceeding further the Supreme Court has observed as under with regard to the scheme of Section 31:

'Thus it will be seen on a comprehensive view of Section 31 that while the first sub-section determines the jurisdiction of the Court in which an award can be filed, Sub-sections (2), (3) and (4) are intended to make that jurisdiction effective in three different ways, (1) by vesting in one Court the authority to deal with all questions regarding the validity, effect or existence of an award or an arbitration agreement, (2) by casting on the persons concerned the obligation to file all applications regarding the conduct of arbitration proceedings or otherwise arising out of such proceedings in one Court, and (3) by vesting exclusive jurisdiction in the Court in which the first application relating to the matter is filed. The context therefore, of Sub-section (4) would seem to indicate that the sub-section was not meant to be confined to applications made during the pendency of an arbitration.'

These observations show the comprehensive nature of the jurisdiction which vests in court under all the four sub-sections of Section 31.

14. Special reference to Sub-section (3) shows that every application, which is with regard to the conduct of the arbitration proceedings, or which arises out of such proceedings, should be made to the court where award may be filed. Therefore, if a particular application is found to be either regarding the conduct of a particular arbitration proceeding, or arising out of such arbitration proceeding, such an application can be filed to this court because there is no dispute about the fact that this is the court where award will have to be filed after the arbitrator makes the same. The simple question, therefore, is whether the present is the application which is regarding the conduct of arbitration proceedings or which arises out of the arbitration proceedings. In my opinion, it is both, for the simple reason, that in this application the State has made a grievance that the arbitration proceedings are not properly conducted because the arbitrator has no jurisdiction to issue interim order of this type. It can also be said to be arising out of the arbitration proceedings for the simple reason that the interim order which is challenged is an order arising out of the arbitration proceedings. There can, therefore, be no dispute about the fact that this court has got jurisdiction to entertain such applications under Sub-section (3) of Section 31, and to dispose of the same under Sub-section (4) thereof.

15. Shri Malhotra, learned Advocate of the claimants, however, contended that what Section 31 does is merely to confer jurisdiction without conferring power in the court to decide such matters. He pointed out that the scheme of the Act suggests that the concept of power and concept of jurisdiction are quite different. Now it cannot be gainsaid that both these concepts are different. Simply because a particular authority is clothed with a particular power, that authority does not in all cases get the jurisdiction to exercise that power. Therefore, the concept of power and the concept of jurisdiction are undoubtedly different concepts. But whenever a particular authority is given jurisdiction to do a particular thing, the vesting of that jurisdiction becomes meaningful only if the authority has power to do that thing. In other words, existence of jurisdiction necessarily implies the existence of power to do the thing in dispute. Under the circumstances, when Sub-section (3) of Section 31 says that the particular court has got jurisdiction to entertain applications regarding the conduct of arbitration proceedings or the applications arising out of such proceedings, it necessarily implies that that court has got power to decide such applications. This aspect of the matter is made more clear by Sub-section (4) of Section 31. Under the circumstances, this preliminary objection raised on behalf of the claimants that this court should not interfere with the impugned order of the arbitrator as it has got no power under the Act to do so, should fail.

16. This takes me to the next question, namely; whether the arbitrator had jurisdiction to pass the interim order in question.

17. It need not be emphasised that the arbitrator derives his power to determine a particular question either from the arbitration agreement or from the statute i. e. the Arbitration Act. If a reference is again made to Clause 29 of the arbitration agreement which is already quoted in the foregoing portion of this judgment, it will be found that what the parties have agreed to refer to the arbitrator is any question or difference 'as to the matter in any way connected with or arising out of these presents or the operation thereof or the rights, duties, or liabilities of either parties'. The wordings of this clause are wide enough to cover the question or difference relating to the subject-matter of arbitration and the rights, dutieg and liabilities arising therefrom. The width and amplitude of these words obviously cover only those questions which arise out of the subject-matter of arbitration. But the question is whether these words are sufficient enough to empower the arbitrator to issue interim orders. Such a question has been considered by the High Court of Calcutta in Surendra Kumar v. Sushil Kumar reported in AIR 1928 Cal 256. In the case before the Calcutta High Court the words used in arbitration agreement were as under:--

'to do all works in connection with the subject-matter of the suit and to decide the suit.'

Construing these words the learned Judges of the Calcutta High Court held that in their opinion these words did not include the power of 'passing of orders for interim protection'. I find myself in respectful agreement to this view for the simple reason that the powers conferred by the arbitration agreement on the arbitrator cannot go beyond the scope of the agreement itself, and if the agreement clearly suggests that the parties to it never intended to confer powers on the arbitrator even to pass interlocutory orders for the preservation of the property in dispute, the said power cannot be extended on the basis of the generality of other provisions contained in the agreement.

18. Then the question is whether the statute i. e. the Indian Arbitration Act, 1940 anywhere invests the arbitrator with such a power. If a reference is made to the provisions contained in the Arbitration Act, it will be found that Section 13 describes the powers of arbitrator in the following terms:--

'13. The arbitrators or umpire shall, unless different intention is expressed in agreement, have power to--

(a) administer oath to the parties and witnesses appearing;

(b) state a special case for the opinion of the court on any question of law involved, or state the award, wholly or in part, in the form of a special case of such question for the opinion of the Court;

(c) make the award conditional or in the alternative;

(d) correct in an award any clerical mistake or error arising from any accidental slip or omission;

(e) administer to any party to arbitration such interrogatories as may, in the opinion of the arbitrators or umpire, be necessary.'

This section enumerates five items for investing the arbitrator with different types of power. None of these five items can be construed as investing the arbitrator with power to pass interim orders. My attention was, however, drawn by Shri Malhotra, the learned Advocate of the claimants, to paragraph 6 of the First Schedule which contains implied conditions of arbitration agreement This paragraph 6 is in the following terms:

'6. The parties to the reference and all persons claiming under them shall, subject to the provisions of any law for the time being in force, submit to be examined by the arbitrators or umpire on oath or affirmation in relation to the matters in difference and shall, subject as aforesaid, produce before the arbitrators or umpire all books, deeds, papers accounts, writings and documents within their possession or power respectively which may be required or called for and do all other things which during the proceedings on the reference, the arbitrators or umpire may require.'

Shri Malhotra put emphasis on the last sentence of this paragraph which requires the parties to the reference to do 'all other things which during the proceedings on the reference the arbitrators or umpire may require'. It was contended, relying upon these words, that the generality of powers conferred by these words on the arbitrator suggests that the arbitrator can require the parties to the reference to do every other thing which is incidental to the main power namely, to finally decide the disputes which are referred to the arbitrator. In my opinion, this contention is not acceptable for the simple reason that the generality of the power which is contemplated by these words must be confined to the specific power which is referred to in the main body of paragraph 6 of the First Schedule. It is obvious that this paragraph of the First Schedule is with reference to the arbitrator's power to examine witnesses and require them to produce all books, deeds, papers, accounts, writings and documents which are in the possession or power of the parties concerned. Therefore, the general power which is- contemplated by the above quoted words of paragraph 6 have reference only to the duties of the parties and the persons claiming under them to give the evidence and to produce books and documents etc. during the course of the arbitration proceedings.

19. I thus find that there Is no specific provision in the Indian Arbitration Act, 1940 which would enable an arbitrator to pass an interim order which would otherwise be passed by a civil court under the provisions of the Code of Civil Procedure.

20. It is already noted that the parties to the arbitration agreement can by the agreement between themselves invest the arbitrator with certain powers for passing necessary orders for the purpose of preservation of the property in dispute. In fact, the parties in the Calcutta case of Debendra Nath v. Dwijendra Nath reported in AIR 1970 Cal 255 had done so. The reported decision in this case shows that under the terms of settlement, which was arrived at by the parties in that case, the arbitrator had been empowered to give necessary interim direction for the protection and/or conduct of the joint business. In view of this agreement between the parties the High Court of Calcutta in that case considered the question whether the proviso which is attached to Section 41 of the Indian Arbitration Act would come into operation, and whether it would be open to the Court, in view of that proviso, to pass any order for the appointment of receiver. The court held that since the proviso attached to Clause (b) of Section 41 prohibits the court from doing anything which would result in prejudice to the powers conferred on the arbitrator it was not open to the court to make an appointment of a receiver. In that case the court refrained from passing an order of appointment of receiver under Clause (b) of Section 41 of the Act because the court found that the settlement between the parties invested the arbitrator with the power to give necessary interim direction for the protection of the property in dispute. Since in the case before me the parties are not found to have empowered the, arbitrator to pass any such orders, we have only to look to the provisions of the statute to find out whether the arbitrator has any such power, and since the statute does not contain any such provision, there is no escape from the conclusion that the arbitrator here had no power to pass any such interim order of injunction.

21. So far as the statutory powers of the arbitrator to pass such interim orders are concerned, we have to take into consideration even the above referred provisions of Section 4l of the Arbitration Act. This section is in the following terms:--

'41. Subject to the provisions of this Act and of rules made thereunder:

(a) the provisions of the Code of Civil Procedure, 1908, shall apply to all proceedings before the Court and to all appeals, under this Act; and

(b) the Court shall have, for the purpose of, and in relation to, arbitration proceedings, the same power of making orders in respect of any of the matters set out in the Second Schedule as it has for the purpose of, and in relation to. any proceedings before the Court:

Provided that nothing in Clause (b) shall be taken to prejudice any power which may be vested in an arbitrator or umpire for making orders with respect to any of such matters.'

22. These provisions show that if the proceedings are already pending before the Court then Clause (a) would apply and pursuant to that clause all the provisions of the Code of Civil Procedure would be applicable and the Court would be justified in passing orders pursuant to these provisions of the Code of Civil Procedure. This is, of course, subject to the provisions of the Indian Arbitration Act. If the proceedings are not actually pending before the Court, then for the purpose of and in relation to arbitration proceedings Clause (b) of Section 41 empowers the court to make orders in respect of any of the matters set out in second Schedule to pass such orders as the court may deem fit. Reference to the Second Schedule shows that one of the subjects mentioned therein is the subject of interim injunction (vide page 4). Therefore, in relation to arbitration proceedings the court has power to pass an interim injunction even in cases where the proceedings are not actually before the Court. But this power is controlled by the proviso which says that the court cannot exercise the said power so as to prejudice any power which may be vested in the arbitrator. This proviso, therefore, makes it clear that the original power of the Court to issue interim orders and the power of the arbitrator, operate in distinct fields with the result that if the court finds that by the exercise of its powers to pass interim orders it would prejudice the power of the arbitrator; the court would refrain from exercising the said power as was done in the above referred Calcutta case of Debendra Nath v, Dwijendra Nath (AIR 1970 Cal 255) (supra). Thus, it is evident that on its true construction Clause (b) of Section 41 would operate only when the arbitrator has no original power to make an interim order with a view to preserve the property in dispute.

23. On the question whether the arbitrator has got any statutory power to Issue interim orders we get sufficient guidance from some of the English decisions. Para 1092 of Halsbury's Laws of England, Hailsham Edition, Volume I on page 643 shows the following observations:--

'The Court when making an order to say, or at any time thereafter, may grant any relief which would not be obtainable in the arbitration, such as the appointment of a receiver, or an injunction.'

The cases which are digested for this proposition are Law v. Garrett (1878) 8 Ch D a6, C. A.; Pini v. Roncoroni. (1892) 1 Ch 633; Brighton Marine Palace and Pier Ltd. v. Woodhouse, (1893) 2 Ch 486 and Willesford v. Watson (1873) 8 Ch App 473. These cases are not available to me but I find that one of these cases, namely Willesford v. Watson is referred to in the above referred Calcutta decision of Surendra Kumar v. Sushil Kumar (AIR 1928 Cal 256) as under:--

'In the case of Willesford v. Watson, Lord Selborne expressed the view that, if since the passing of the Common Law Procedure Act, parties chose to determine for themselves that they will have a forum of their own selection instead of resorting to the ordinary Courts, a prima facie duty is oast upon the Courts to set upon such arrangement. That the plaintiff's right to a receiver and injunction is not a matter to refer can hardly be disputed. As regards injunction, there is clear authority, see Willesford v. Watson, where Lord Selborne says:-- 'It is said that the arbitrator could not grant an injunction. No doubt he could not grant an injunction; but he might say that the thing was not to 'be done and there being liberty to apply to this Court, this Court would then grant the injunction.'

24. The question seems to have arisen incidentally even in a Jammu & Kashmir case of Jammu Forest Co. v. State of Jammu and Kashmir reported in AIR 1968 J & K 86. Therein the direct question, which was involved, and was argued before the Court, was whether the Court had power to pass an interim order under Section 41 (b) read with Second Schedule after the reference was made to the arbitrator. The following observations show that it was argued before the Court that since the arbitrator had no power to issue interim orders the court must exercise this power. Reference to reported judgment shows that the court did not record any express, opinion on this question, but has more or less worked on the strength of the argument which was advanced before it. These observations are found in para 8 of the reported judgment and are as under:--

'Ordinarily once a reference was made, to the arbitrator, the arbitrator should have been the proper authority to decide such an incidental matter. I have been made to run through the provisions ef the whole Arbitration Act and it has been argued by the learned counsel for the petitioner that the arbitrator has no such powers. Section 13 defines the powers of the arbitrator, which are enumerated in five paras from (a) to (e). All those need not be reproduced but none of the powers given therein discloses that an arbitrator has a power to pass such an order or grant such interim relief to either party. Section 27 of the Act gives the arbitrator power to make an interim award. It is argued that granting of an ad interim injunction is not issuing an interim award. Beyond these two sections there is no other section in the Arbitration Act which empowers an arbitrator to pass an order of the kind requested for by the petitioner in this case.'

25. I, however, find that the High Court of Madhya Pradesh has made certain observations in Daulat Ram v. Shri Ram (AIR 1964 Madh Pra 219) supporting the view which I am taking. In that case the court was called upon to interpret the real impact of Clause (b) of Section 41 read with Second Schedule item (4) and the court construed the words 'for the purpose of and in relation to arbitration proceedings'. In this decision the Madhya Pradesh High Court observed aa under:--

'The arbitrators have not been vested by the Act with any power to grant interim orders for the protection and safety of the subject-matter of the dispute. Such powers, had therefore, to be vested in court under Section 41 (b) of the Act read with Second Schedule. I do not find anything in that section or in that Second Schedule to justify the view that the powers to grant interim orders for the protection and safety of the properties in dispute cannot be exercised until the proceedings under some other section of the Act are started.'

26. I thus find that neither the arbitration agreement nor any of the provisions of the Indian Arbitration Act empowers the arbitrator to pass the interim orders of the type passed by the arbitrator In this case. In this view of the matter, the application made by the State in O.M.P. No. 56 of 1973 should be allowed. Allowing this application, it is ordered that the interim order passed by the arbitrator is found to be without jurisdiction and is, therefore, set aside. This petition is accordingly allowed and the rule is made absolute with costs.

27. In O.M.P. No. 99 of 1973 it is ordered that the extension of four months as prayed for is granted to the arbitrator from today. There shall be no order as to costs in this O.M.P.


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