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IN THE HIGH COURT OF JUDICATURE AT PATNA
PARTHA SARTHY, J.
Misc. Appeal No.238 of 2021
(8.1.2024)
State of Bihar & Ors. ... Appellants
vs.
Bihar Rajya Bhumi Vikas
Bank Samiti ... Respondent
Civil Procedure Code, 1908 – Section 11 – Res Judicata – Rule of res judicata is meant to give finality to a decision arrived at after due contest and after hearing parties interested in controversy – It is in interest of public at large that a finality should attach to binding decisions pronounced by Courts of competent jurisdiction and it is also in public interest that individuals should not be vexed twice with same kind of litigation – Even an erroneous decision on a question of law may operate as res judicata between parties in a subsequent suit or proceeding if cause of action is same – Principle of res judicata would apply in different proceedings out of same cause of action but would also apply in different stages of same proceedings. (Para 23)
Arbitration and Conciliation Act, 1996 – Sections 16, 34 and 37 – Competence of Arbitral Tribunal to rule on its jurisdiction – Liberty of raising plea of jurisdiction is provided in Section 16 of Act and same could not be denied on the ground of same being barred by principles of res judicata or constructive res judicata – No provision of appeal has been provided under Act against an order of Arbitral Tribunal under Section 16(5) of Act rejecting plea raised as to whether Arbitral Tribunal has jurisdiction or not. (Paras 30 and 36)
Arbitration and Conciliation Act, 1996 – Sections 34 and 37(1)(c) read with Sections 7 and 8 – Appeal against arbitral award – There is no arbitration agreement between parties – Even in absence of an agreement, parties may enter into an agreement in Court and matter may be referred for arbitration – However, this agreement also should be in writing – Arbitrator committed error in holding that even in absence of an arbitration agreement arbitration proceeding was valid and entertainable – In absence of any arbitration agreement there was no occasion for sole Arbitrator to act as such, he had no jurisdiction and award made by him is not sustainable and fit to be set aside – Impugned award was bad in law as Arbitrator had no jurisdiction to proceed in absence of arbitration agreement – Claim was barred by law of limitation and necessary parties had also not been impleaded by respondent- Bank – Award made by sole Arbitrator set aside – Appeal allowed. (Paras 40, 44, 45, 59, 61 and 62)
Partha Sarthy, J. – The instant appeal has been preferred under Section 37(1)(c) of the Arbitration and Conciliation Act, 1996 (‘the Act’ in short) praying for setting aside the judgment dated 9.10.2020 passed in Miscellaneous Case no.32 of 2016 whereby the learned Additional District Judge-X, Patna was pleased to dismiss the petition under section 34 of the Act filed by the appellants.
2. The relevant facts for the purpose of the instant appeal are that the Multi-State Cooperative Land Development Bank (herein after referred to as ‘the Bank’) filed CWJC no. 1730 of 2010 in the Patna High Court for commanding the State of Bihar to release a sum of Rs. 570.79 crores which according to the Bank stood as dues under different heads along with the interest accrued there upon. The case of the Bank was that it had advanced loans for agricultural purposes at the instance of the State of Bihar, on its assurance that it will make good the loss suffered by the Bank. Taking note of the fact that adjudication of the issues involved examining of conflicting claims and documents which would be difficult for this Court to decide in its writ jurisdiction, this Court disposed of CWJC no. 1730 of 2010 by order dated 19.10.2012 ordering that the petitioner Bank would to take steps for appointment of an Arbitrator in terms of section 11 of the Act for settling the disputes or may request the State Government to appoint a committee consisting of senior officials, one of which must be serving with the Central Government.
3. Pursuant to the directions of this Court as contained in order dated 19.10.2012, the Bank filed Request Case no. 4 of 2013.
4. By order dated 7.3.2014, this Court was pleased to dispose of the Request Case no.4 of 2013 appointing Hon’ble Mr. Justice Shubash Chandra Jha (Retd.) as the sole-Arbitrator with a direction to the Arbitrator to decide the same at the earliest but not later than six months from the day statement of claim is received by him.
5. The State of Bihar preferred L.P.A. no. 748 of 2013 against the order dated 19.10.2012 passed in CWJC no.1730 of 2010. The State of Bihar also preferred S.L.A (Civil) no. 15552 of 2014 against the order dated 7.3.2014 passed in Request Case no.4 of 2013, appointing an Arbitrator in the case. The Hon’ble Supreme Court by its order dated 14.7.2014 was pleased to dismiss S.L.A (Civil) no.15552 of 2014. Subsequently, taking note of submission of learned counsel for the State that he did not intend to press the appeal (L.P.A no.748 of 2013), this Court by its order dated 10.11.2016 dismissed L.P.A no.748 of 2013 as not pressed.
6. On the advocate for the Bank appearing, the sole Arbitrator issued notice to all the respondents on which objections were filed by the State of Bihar, the Department of Finance as also the Minor Irrigation Department of Government of Bihar. A rejoinder to the objection of the State of Bihar was filed by the Bank.
7. A preliminary objection was raised on behalf of the Department of Finance and the State Government on the question of jurisdiction of the arbitration proceeding, the main objection being that in absence of any arbitration agreement the matter could not have been referred for arbitration. It was further contended that even if it had been referred for arbitration, the question of maintainability of the arbitration proceeding should be decided first by the Arbitrator in view of provisions of the Act.
8. The sole Arbitrator having heard learned counsels for the parties, by his order dated 24.5.2015, taking note of the dismissal of S.L.A (Civil) no.15552 of 2014 by the Hon’ble Supreme Court was pleased to hold the objection raised by the State Government to be barred by principle of res judicata/constructive res judicata, rejected the preliminary objection and held the arbitration reference to be valid and entertainable. The appellants did not challenge the order dated 24.5.2015 of the sole-Arbitrator before any Court, separately.
9. The sole Arbitrator proceede
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