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SUPREME COURT OF INDIA
T.S. THAKUR, CJI., R. BANUMATHI, J.
M/s. Northern Coalfield Ltd. – Appellant
Versus
Heavy Engineering Corp. Ltd. & Anr. – Respondents
Civil Appeal No. 6296 of 2016 [Arising out of Special Leave Petition (C) No. 27646 of 2008]
Decided On : 13-07-2016
(2011) 3 SCC 404; (2004) 6 SCC 437; 1995 Supp (4) SCC 541; (2007) 7 SCC 39; (2008) 9 SCC 349; (2010) 13 SCC 42 – Referred
(b) Permanent Machinery of Arbitration (PMA) – Not set up under statutory framework – Award not enforceable or executable – Instantly appellant losing before PMA and not accepting the award – Its dispute remains not adjudicated – It has a right for adjudicating its dispute – Rightly filing suit for declaring the award null and void – Plaint ought not be rejected – Code of Civil Procedure, 1908 – Order VII, rule 11(d). (Para 25)
(c) Arbitration and Conciliation Act, 1996 – Section 11(5) – Appellant consenting to have all claims and counter claims adjudicated in accordance with law – Court appointing a sole arbitrator. (Para 26, 28)
Facts of the case:
Appellant – Northern Coalfield Ltd. awarded (1) a Contract for works and services and (2) a Contract for equipment and spares to the respondent – Heavy Energy Corporation Ltd. for construction of a Coal Handling Plant.
The contracts contained arbitration clause.
Disputes having actually arisen in relation to the two contracts, the same were referred for resolution in terms of the “permanent in-house administrative machinery” set up by the Government. Claims and counter claims were made by the two corporations against each other which finally culminated in the making of two awards both dated 28.02.1997 under which respondent No.1 was held entitled to a sum of Rs.16,87,61,981.11/-, while the appellant was awarded Rs.56,05,000/-.
Both the parties were, however, dissatisfied with the awards which they challenged in appeals filed before the Law Secretary, Department of Legal Affairs, Ministry of Law and Justice.
During the pendency of the appeals respondent No.2 – M/s. Rampur Engineering Company Ltd. filed a suit before the High Court of Delhi against the two corporations praying for an injunction restraining respondent No.1 from settling the disputes with the appellant.
By an interim order, the High Court restrained the parties from implementing any award made by the appellate authority.
In the appeal arising out of the contract for works and services the appellate authority made an award on 13.11.1999 holding that a sum of Rs.15,84,50,000/-apart from Rs.3.73 crores due as interest was recoverable from the appellant. Appeal filed by the first respondent was remanded back to the Arbitrator for reconsideration.
Appellant-herein filed Civil Suit before the High Court of Delhi claiming a declaration to the effect that respondent No.1 had committed a breach of Clause 3 of the terms of the Contracts executed between the two Corporations by sub-letting the contract to respondent No.2 thereby rendering the contracts between the appellants and the first respondents null and void and that the respondent No.1 was not entitled to claim any relief under those contracts nor was respondent No.2 entitled to do so.
The Single Judge of the High Court restrained the implementation/execution of awards passed by the Appellate Authority.
The defendant-respondents herein moved an application under Order 7, Rule 11(d) of the Code of Civil Procedure, 1908 praying for rejection of the plaint in the suit filed by the appellant.
A Single Judge of the High Court allowed the application filed by the defendants-respondents and rejected the plaint filed by the appellant.
The Division Bench has affirmed the rejection of the plaint by the learned Single Judge.
Finding of the Court:
High Court misread the ONGC III.
Result: Appeal allowed. Arbitrator appointed.
JUDGMENT :
T.S. Thakur, CJI.
1. Leave granted.
2. This is yet another case that brings to fore a sad state of affairs when it comes to resolving disputes between two Government owned corporations. What adds to the enigma of apathy towards realism in official circles is the fact that the respondent-corporation has with considerable tenacity opposed the move aimed at a quick and effective resolution of the conflict and resultant quietus to the controversy by a reference of the disputes to arbitration in terms of the Arbitration and Conciliation Act, 1996.
The Facts:
3. Appellant – Northern Coalfield Ltd. issued a tender for construction of a Coal Handling Plant at Bina sometime in May, 1984. The construction work was meant to be carried out under two contracts: viz. (1) a Contract for works and services and (2) a Contract for equipment and spares. Both these contracts were awarded to the respondent – Heavy Energy Corporation Ltd. which is also a Government of India company. The contracts contained a Clause that provided for adjudication of disputes between the parties by way of arbitration. Disputes having actually arisen in relation to the two contracts, the same were referred for resolution in terms of the “permanent in-house administrative machinery” set up by the Government. Claims and counter claims were made by the two corporations against each other which finally culminated in the making of two awards both dated 28.02.1997 under which respondent No.1 was held entitled to a sum of Rs.16,87,61,981.11/-, while the appellant was awarded Rs.56,05,000/-. Both the parties were, however, dissatisfied with the awards which they challenged in appeals filed before the Law Secretary, Department of Legal Affairs, Ministry of Law and Justice in terms of the in-house mechanism provided by the Government. While Appeal No.67 of 1998 filed before the Law Secretary pertained to the contract for supply of equipment, Appeal No.64 of 1999 pertained to the contract for execution of works and services.
4. During the pendency of the appeals aforementioned respondent No.2 – M/s. Rampur Engineering Company Ltd. filed Suit No.450 of 1999 before the High Court of Delhi against the two corporations in which the said respondent prayed for an injunction restraining respondent No.1 from settling the disputes with the appellant. The appellant’s case is that it came to know about the role of Respondent No.2 in the execution of contracts only after the filing of the said suit in which by an interim order, the High Court restrained the parties from implementing any award made by the appellate authority. The appellant’s further case is that respondent No.1 had, contrary to Clause 3 of the Terms of Contracts executed with the appellant, sublet the contracts in favour of respondent No.2 without prior consent of the former and that the said arrangement was of no legal consequence nor did it create any legal relationship between the appellant and the sub-contractor.
5. Appeal No.64 of 1999, arising out of the contract for works and services came to be disposed of first, wherein the appellate authority made an award on 13.11.1999 holding that a sum of Rs.15,84,50,000/-apart from Rs.3.73 crores due as interest was recoverable from the appellant. Appeal No.67 of 1998 filed by the first respondent was disposed of by the appellate authority on 01.12.1999 remanding the matter back to the Arbitrator for reconsideration. Aggrieved by the awards made by the Arbitrator and the appellate authority, the appellant-herein filed Civil Suit No.1709 of 2000 before the High Court of Delhi in which it claimed a declaration to the effect that respondent No.1 had committed a breach of Clause 3 of the terms of the Contracts executed between the two Corporations by sub-letting the contract to respondent No.2 thereby rendering the contracts between the appellants and the first respondents null and void. The appellant further prayed for a declaration to the effect that respondent No.1 was not e
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