JUDGMENT

B.R. Gavai, J.

1. Two important questions of law, with regard to the legislative competence of the Kerala State Legislature to enact the Kerala Revocation of Arbitration Clauses and Reopening of Awards Act, 1998 (hereinafter referred to as the “State Act”) and as to whether the State Act encroaches upon the judicial power of the State, are involved in the present appeals.

BACKGROUND:

2. The High Court of Kerala at Ernakulam, by the impugned judgment dated 9th July 2013 delivered in O.P. No.4206 of 1998 and companion matters, has held the State Act to be beyond the legislative competence of the Kerala State Legislature and as such, held the same to be unconstitutional. The High Court has also held that the State Act had an effect of annulling the awards of the arbitrators and the judgments and decrees passed by the courts. It was therefore held that the State Act encroaches upon the judicial power of the State. Being aggrieved thereby, the State of Kerala has approached this Court by filing various appeals.

3. The State of Kerala had started the construction of Kallada Irrigation Project (hereinafter referred to the “said Project”) in the year 1961. The said project was proposed to be executed with the financial assistance from the International Bank for Reconstruction and Development (for short “World Bank”) from June 1982 to March 1989. As required by the World Bank, a special condition namely, the Local Competitive Bidding Specification (hereinafter referred to as “LCBS”) as envisaged by the World Bank Authorities was included in the agreements relating to the works connected with the said Project. Clauses 51 and 52 of the LCBS provided for the settlement of matters in dispute or difference through arbitration. The same was provided with a view to enable speedy settlement of matters in dispute or difference in a just and equitable manner. The State of Kerala found that on account of various disputes and differences, the arbitration references did not have the desired effect inasmuch as several arbitrators had wrongly and arbitrarily awarded unconscionable amounts against the provisions of agreements and without material on record, in collusion with the claimant contractors and officials of the department, thereby causing heavy losses to the State. As such, the State of Kerala considered it necessary, in public interest, to cancel the arbitration clauses in the agreements executed in terms of LCBS, to revoke the authority of the arbitrators appointed thereunder and to enable the filing of appeals against the awards or decrees already passed in certain arbitration references in respect of which the period of limitation had expired. As such, the State Act came to be enacted with effect from 14th November 1997.

4. The State Act is a short Act and therefore, we deem it appropriate to reproduce the same in its entirety as under:

“Kerala Revocation of Arbitration Clauses and Reopening of Awards Act, 1998

Preamble …………..

………..

Section 1 - Short title, extent, commencement and application

(1) This Act may be called the Kerala Revocation of Arbitration Clauses and Reopening of Awards Act, 1998.

(2) It extends to the whole of the State of Kerala.

(3) It shall be deemed to have come into force on the 14th day of November, 1997.

(4) It shall apply to all agreements executed in terms of the local competitive bidding specification.

Section 2 - Definitions

(1) In this Act, unless the context otherwise requires,

(a) “agreement” means an agreement executed in terms of the local