1. Challenge to the constitutionality of a state amendment act nullifying arbitral awards made by statutory tribunals and subsequently made rules of court. (Para 1 , 2 , 3 , 4 , 5 )
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1995 Supreme(SC) 694
SUPREME COURT OF INDIA
A.M. AHMADI, C.J.I., AND N. VENKATACHALA, J.
G. C. Kanungo, Petitioner
Versus
State of Orissa, Respondent
Writ Petn. (Civil) Nos. 1151 of 1991 and 491 of 1992
Decided on 12-5-1995.
AND
D. C. Routray, Petitioner
Versus
State of Orissa, Respondent.
Important Points
A state legislature cannot nullify judicial decisions or awards made by tribunals exercising judicial power by simply declaring them invalid through legislation. Such an act encroaches upon the judicial power of the State and violates the Rule of Law, a basic feature of the Constitution.
Subject
Constitutional Law - Separation of Powers
Act Referred
ARBITRATION ACT: S.368, S.17, Ch.6, S.41(a), Part.vi
ARBITRATION ORISSA SECOND AMENDMENT ACT: S.2, S.3
CIVIL PROCEDURE CODE: S.33
CONSTITUTION OF INDIA: Art.245, Art.246, Art.254, Sch.7 List.3 Entry.13
ARBITRATION ORISSA SECOND AMENDMENT ACT: S.2, S.3
CIVIL PROCEDURE CODE: S.33
CONSTITUTION OF INDIA: Art.245, Art.246, Art.254, Sch.7 List.3 Entry.13
Headnote
Constitution Of India,1950 - Article 32 - Amendment Acts - Section 47 - Arbitration Act, 1940 - Section 41-A - Special Arbitration Tribunal - Appointment of a separate arbitrator - Government for construction of high level bridges one over river and another over dispute to arise between parties under said contracts was required to be resolved by having recourse Arbitration Principal Act because of Arbitration clause that stood incorporated in each of them by agreement of parties- Orissa Government which rescinded both contracts and another it appears did not concede petitioners claim exceeding rupees one made in relation to each of them- This situation appears to have led petitioner to institute two separate proceedings under Principal Act in Court of Sub-Judge - Court of Sub-Judge seeking appointment of arbitrators to decide disputes relating to his claims made in respect of said two contracts- appointment of a separate arbitrator for deciding each of said disputes it appears was made Court of Sub-Judge when Principal Act as applicable State of Orissa was amended by Arbitration Orissa Amendment providing forum of Arbitration Tribunal for deciding arbitral disputes arisen or arising from contracts –Held, Court judgment and decrees of Courts are sought to be nullified Amendment Act admits of no doubt that legislative power of State Legislature is used by enacting impugned to nullify or abrogate awards of Special Arbitration Tribunals by arrogating to itself a judicial Cauvery Water Disputes Tribunal From this it follows that State Legislature by enacting Amendment Act has encroached upon judicial power entrusted to judicial authority resulting in infringement of a basic feature of Constitution - Thus when Amendment Act nullifies awards of Special Arbitration Tribunals made in exercise of judicial power conferred upon them Amendment Act encroaching upon judicial power State court have no option but declare it as unconstitutional having regard to well settled and undisputed legal position that Legislature has no legislative power render ineffective earlier judicial decisions by making a law which simply declares 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 judicial power State vested in a judicial Tribunal as Special Arbitration Tribunals Amendment Act- Moreover where arbitral awards sought be nullified Amendment Act those made by Special Arbitration Tribunals constituted by State itself Amendment 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 State if nothing else abuse of its power of legislation - Petitions allowed
Legal Category Hierarchy
Advocates:
A.K.PANDEY, ANIL GUPTA, J.K.DAS, Millon Kanungo, N.SANTOSH HEGDE, R.F.NARIMAN, R.K.MEHTA, VINU BHAGAT, YASHANK ADHYARU
A.K.PANDEY, ANIL GUPTA, J.K.DAS, Millon Kanungo, N.SANTOSH HEGDE, R.F.NARIMAN, R.K.MEHTA, VINU BHAGAT, YASHANK ADHYARU
Table of Contents
2. State legislature lacked competence, acted mala fide, encroached upon judicial power by nullifying court-affirmed awards, and violated Article 14. (Para 6 , 7 )
3. State had legislative competence; however, nullifying reasoned awards of statutory tribunals exercising judicial power constitutes an impermissible encroachment on the judicial power of the State. (Para 11 , 12 , 14 , 16 , 19 , 24 , 25 , 29 )
4. Legislative power cannot be used to render ineffective judicial decisions of statutory tribunals, as such action encroaches upon the judicial power of the State. (Para 18 , 29 )
5. Writ petitions allowed and the state amendment act struck down as unconstitutional for nullifying arbitral awards made by statutory tribunals. (Para 31 , 32 )
6. Can a State Legislature enact laws on a subject in the Concurrent List already covered by Parliamentary legislation?
Yes, provided the State law obtains the assent of the President after being reserved for consideration, in which case it prevails in that State notwithstanding repugnancy to the Parliamentary enactment. (Para 11 )
7. Does an ulterior motive or mala fides attributed to a State Legislature render a law within its competence unconstitutional?
No, mala fides or ulterior motives attributed to a legislature cannot make a law unconstitutional if the legislature had the competence to enact it. (Para 12 , 13 )
8. Do arbitral awards merge into the judgments and decrees of courts when they are made rules of court?
No, making an award a rule of court merely adds a seal for enforceability through court machinery; it does not transform the award into a judicial decision of the court. (Para 16 , 17 )
9. Can a legislature nullify the decisions of a statutory tribunal exercising judicial power?
No, a legislature cannot render ineffective earlier judicial decisions by simply declaring them invalid, as this encroaches upon the judicial power of the State and violates the Rule of Law. (Para 18 , 29 )
JUDGMENT
VENKATACHALA, J. — Question of constitutionality of the Arbitration (Orissa Second Amendment) Act, 1991, to be referred to hereinafter as the 1991 Amendment Act, which has amended the Arbitration Act, 1940, to be referred to hereinafter as the Principal Act, in its application to the State of Orissa, arises for our consideration and decision in the present writ petitions filed under Article 32 of the Constitution.
2. Petitioner in Writ Petition No. 1151 of 1991 had entered into two contracts with the Orissa Government in the year 1969 and 1970 for construction of high level bridges ( one over the river Daya and another over the river Rushikulya. Any dispute to arise between the parties under the said contracts, was required to be resolved by having recourse to Arbitration under the Principal Act because of the Arbitration clause that stood incorporated in each of them, by agreement of parties. The Orissa Government which rescinded both the contracts ( one in the year 1974 and another in the year 1975, it appears, did not concede to the petitioners claim, exceeding rupees one crore made in relation to each of them. This situation appears to have led the petitioner to institute two separate proceedings under the Principal Act in the Court of Sub-Judge, Bhuvaneshwar - the Court of Sub-Judge seeking appointment of arbitrators to decide the disputes relating to his claims made in respect of the said two contracts. The appointment of a separate arbitrator for deciding each of the said disputes, it appears was made by the Court of Sub-Judge in the year 1981. But, in the year 1982 when the Principal Act, as applicable to the State of Orissa , was amended by the Arbitration (Orissa Amendment) Act, 1982 - the 1982 Amendment Act, providing forum of Arbitration Tribunal for deciding arbitral disputes arisen or arising from contracts as those of the petitioner, a controversy appears to have cropped up, as to whether the arbitrators appointed by the Court of Sub-Judge, in the proceedings before, had to be replaced by an Arbitration Tribunal to be constituted according to the 1982 Amendment Act. When the said controversy had still to be resolved, the Arbitration (Orissa Amendment) Act, 1984 - the 1984 Amendment Act, it is said came into force amending the Principal Act insofar as it became applicable to the Orissa State by providing for a Special Arbitration Tribunal to be constituted by the State Government, for deciding arbitral disputes arisen or arising in relation to the contracts, as those of the petitioner, where claim involved was, of rupees one crore or above. The aforesaid controversy, whether the arbitrators earlier appointed by the Court of Sub-Judge, should be replaced by Special Arbitration Tribunal to be appointed by the State Government as required under the 1984 amendment Act, which had cropped up because of the coming into force of the said two Amendment Acts, it is said, ultimately ended in this Court with the replacement of arbitrators who had been appointed by the Court of Sub-Judge, by Special Arbitration Tribunals constituted by the State Government with power conferred on those Special Arbitration Tribunals to decide the arbitral disputes raised by the petitioner in respect of this two contracts which had been entered into with the State Government but rescinded by the latter. Two Special Arbitration Tribunals which were so constituted by the State Government, it is said, decided the arbitral disputes of the petitioner referred to them , by the making of awards -- one in the year 1988 and another in the year 1989. The Court of Sub-Judge, before which those two awards had come to be placed for making them Rules of Court are said to have been made Rules of Court by its judgments and decrees. The Rule of Court so made in relation to each award by the Court of Sub-Judge, is said to have been affirmed by the High Court of Orissa. When the Rule of Court so affirmed by the High Court in both the matters were brought
