1. Dispute regarding the appointment of an arbitrator for claims exceeding a specified monetary threshold under government orders. (Para 1 , 2 , 3 )
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1999 Supreme(SC) 1093
SUPREME COURT OF INDIA
G.B.Pattanaik : M.Srinivasan : N.Santosh Hegde
State Of A.P.
Versus
Obulu Reddy
Case No. : 7246 of 1993
Date of Decision : 9/21/99
Claims exceeding Rs. 50,000.00 under G.O. Ms. 430 cannot be decided by arbitration and must be adjudicated by a civil court of competent jurisdiction, as the government order limits arbitration to claims up to Rs. 50,000.00.
Headnote:(A) Government Orders - G.O. Ms. 430 and G.O. Ms. 160 - Arbitration - Jurisdiction - Claims exceeding Rs. 50,000.00 - Whether claims above the specified limit can be decided by an arbitrator or must be adjudicated by a civil court - Under the relevant government order, arbitration is provided only for claims up to Rs. 50,000.00 - Claims above this amount are to be adjudicated by a court of competent jurisdiction by filing a regular suit (Para 4).
(B) Clarificatory Notifications - A subsequent notification issued to resolve confusion regarding the forum for adjudication is clarificatory in nature and does not carve out a new forum (Para 4).
Facts of the case:
Claimants applied for the appointment of an arbitrator for claims exceeding Rs. 50,000.00 based on a government order. The lower court appointed an arbitrator, which was challenged by the State. Due to conflicting views in previous judgments regarding the interpretation of the government order and whether a subsequent notification was prospective or clarificatory, the matter was referred to a larger bench for decision.
Findings of Court:
The court found that the government order provided for arbitration only for claims up to Rs. 50,000.00. Consequently, all claims exceeding this amount must be filed before a civil court of competent jurisdiction. The subsequent government order was merely clarificatory and intended to resolve confusion among claimants and the civil courts.
Issues: Whether claims above Rs. 50,000.00 under the specified government order are subject to arbitration or must be adjudicated by a civil court.
Ratio Decidendi: The court held that the government order specifically limited arbitration to claims up to Rs. 50,000.00, meaning any claim above this threshold must be filed in a civil court. Therefore, the appointment of an arbitrator for claims exceeding Rs. 50,000.00 is legally unsustainable, and any award passed under such an appointment is a nullity.
Result: Appeals filed by the State allowed; appeals filed by claimants dismissed; award given in one case declared a nullity.
Legal Category Hierarchy
Table of Contents
2. Whether claims above a specified monetary limit under government orders are adjudicable through arbitration or require the filing of a regular civil suit. (Para 2 , 3 )
3. Government orders providing arbitration for claims up to a certain limit imply that claims exceeding that limit must be adjudicated by a competent civil court. (Para 4 )
4. Arbitration is limited to claims within the prescribed monetary threshold; claims exceeding this limit must be adjudicated by a civil court of competent jurisdiction. (Para 4 )
5. State appeals allowed and arbitrator appointments set aside; existing awards annulled and claimants' appeals dismissed. (Para 4 , 5 , 6 )
6. Does G.O. Ms. 430 permit arbitration for claims exceeding Rs. 50,000?
No. The court held that G.O. Ms. 430 provides for arbitration only for claims up to Rs. 50,000. All claims exceeding this amount must be adjudicated by a civil court of competent jurisdiction by filing a regular suit. (Para 4 )
7. What is the legal effect of G.O. Ms. 160?
G.O. Ms. 160 is a clarificatory notification intended to resolve confusion among claimants and civil courts regarding the correct forum for claims exceeding Rs. 50,000. (Para 4 )
8. What is the status of an arbitration award issued when the arbitrator was appointed without jurisdiction?
An award issued by an arbitrator appointed in a matter that should have been decided by a civil court is a nullity and stands annulled. (Para 5 )
(1) OUT of these four appeals, two appeals have been preferred by the State of Andhra Pradesh and the other two appeals have been preferred by the private claimants. In the appeals filed by the State, the claimants made an application before the Sub-ordinate Judge for appointing an Arbitrator, the claim being more than 50,000.00 in terms of G.O. Ms. 430.
(2) THE learned Sub-ordinate Judge appointed an Arbitrator which was assailed by the State in the High court contending inter alia, that even under G.O. Ms. 430 the claim above Rs. 50,000.00 is required to be decided upon by filing a Suit and not by Arbitrator. The High court however rejected the said contention hence the present appeals.
(3) IN the appeals filed by the claimants the subordinate Judge having appointed, Arbitrator, the claim being more than Rs. 50,000.00. The State of A. P. assailed the said appointment of Arbitrator and the High court, following the judgment of this court in Vishakapatnam Urban Development Authority v. V. Narayana Raju [1995 (2 SCALE 234], set aside the order of appointment of Arbitrator by the Subordinate Judge. Hence, the claimants are in appeal. (sic) making when these four appeals came up for hearing before a bench of two learned judges of this court, it felt that there has been a (sic) of views in the two judgments of this Court both by a two-Judge bench; one in the Case of State of A. P. v. I Devender Reddy [1993(2 SCALE 732] and the other in the Vishakapatnams case [1995 (2 SCALE 234], (sic) the matter has been referred to a (sic) bench and has been placed before us for consideration and decision.
(4) IN the earlier case, Devender Reddys case (supra), the claim was for more than Rs. 50,000.00 and the point for consideration before this court was whether the second notification issued by the State of Andhra Pradesh, namely, G.O. Ms. 160 is prospective or applies to the pending case before the issuance of the said notification. This court came to the conclusion that the second notification is prospective in nature and there is no dispute over the same. But, the question whether the second notification is merely a clarificatory one or carves out a new forum was not for consideration. In the second case Vishakapatnam Urban Dev. Authority v. V. Narayana Raju [1995 (2 SCALE 234] this Court examined the earlier G.O.Ms. No. 430 dated 24/10/1983 and came to the conclusion that under the said G.O. Ms. the arbitration is provided for only in respect of the claims upto Rs. 50,000.00 and not above, making it clear, therefore, that the claims above Rs. 50,000.00 are to be adjudicated upon by a court of competent jurisdiction by filing a regular suit. It is true that while deciding Vishakapatnams case the earlier judgment of this court in Devender Roddys case was not brought to the notice. But having examined G.O. Ms. No. 430 we have no hesitation to agree with the conclusions arrived at in Vishakapatnam case and hold that under the said G.O. Ms. question of deciding claims above Rs. 50,000.00 - by way of arbitration does not arise. It merely provided that disposal of claims up to Rs. 50,000.00 by way of arbitration indicating as to who would be the arbitrator depending upon the claims and all claims above Rs. 50,000.00 are to be filed before the Civil court of competent jurisdiction. This being the position, the second G.O. Ms. No. 160 is nothing but a clarificatory one and was required to be issued because of the confusion arising in the minds of some of the claimants as well as the Civil court inasmuch as the Civil court did entertain application under Section 8 and appoint arbitrator in respect of claims above Rs. 50,000.00. The earlier judgment of this court in D. Reddys case has interpreted G.O. Ms, No. 430 in a manner which is not the correct interpretation according to us. The orders appointing arbitrator under Section 8 in the two appeals filed by the State are set aside. The appeals filed by the State are allowed.
(5)
