Saurashtra Chemicals Ltd. And ... vs Hon''Ble Mr. Justice K. ... on 13 May, 2005

    Saurashtra Chemicals Ltd. And Ors. vs Hon'Ble Mr. Justice K. Ramamoorthy (Retd.)
on 13/5/2005

JUDGMENT

   M.R. Shah, J.

   1. As common questions of law and facts arise in all the three petitions,
they are being disposed of by this common Judgment and Order.

   2. In Special Civil Application No. 7528 of 2004, the petitioner, Saurashtra
Chemicals Ltd., [hereinafter be referred to as "SCL") has challenged the
legality and validity of the order passed by the Sole Arbitrator, Justice K.
Ramamoorthy (Retd.) dated 20th May 2004 by which the learned Sole Arbitrator had
dismissed the application submitted by the petitioner under Section 16 of the
Arbitration and Conciliation Act, 1996 (hereinafter referred to as "the Act").
It is also further prayed for a declaration that the proceedings before the
respondent No. 1, i.e., learned Sole Arbitrator are a nullity in the eye of law
and that the Sole Arbitrator has no jurisdiction to adjudicate upon the alleged
disputes between the parties.

   3. In Special Civil Application No. 9710 of 2004, the petitioner, Birla VXL
Limited [hereinafter referred to as "Birla VXL"] also challenged the order
passed by the respondent No. 1, Sole Arbitrator, Justice K. Ramamoorthy (Retd.)
dated 20th May 2004 by which the Sole Arbitrator has also dismissed the
application submitted by the petitioner under Section 16 of the Act. It is also
further prayed for an appropriate, writ, direction or order declaring that the
Sole Arbitrator, respondent No. 1 has no jurisdiction to adjudicate upon
respondent No. 2 D.L.F. Universal Limited's claim as against the petitioner
Birla VXL Ltd., and that the proceedings before him qua the petitioner are a
nullity.

   4. So far as Special Civil Application No. 16075 of 2003 is concerned, the
same is filed by SCL challenging the order passed by the Sole Arbitrator late
Justice N.J. Pandya (Retd.) dated 23rd September 2003 in dismissing the
application submitted by the petitioner under Section 16 of the Act not staying
the proceedings pending before it during the notification under the provisions
of the Bombay Relief Undertaking Act ("BRU Act" for short). It is also further
prayed for an appropriate writ, direction or order directing the respondent No.
1 Sole Arbitrator to stay the proceedings pending before him at the stage where
the said notification under BRU Act was received till the date of expiry of the
said notification or till such date to which the said notification is extended.
It is also further prayed for directing the respondent No. 1 Sole Arbitrator not
to proceed with the pronouncement of the award till said notification remains in
force till the date of expiry of the said notification or till such date to
which the said notification is extended.

   5. In the present group of petitions, the following questions arise for
consideration;

     (i) Whether against the interlocutory order and/or order passed by the Sole
Arbitrator passed under the provisions of the Act a writ petition under Article
226 of the Constitution of India is maintainable;

     (ii) If against the interlocutory order/order passed by the Sole Arbitrator
passed under the provisions of the Act more particularly order passed under
Section 16 of the Act a petition under Article 226 of the Constitution of India
is maintainable in that case whether the petition is required to be entertained
or not;

     (iii) In view of the Notification issued by the State Government under the
provisions of BRU Act declaring the company as 'Relief Undertaking' whether the
arbitration proceedings against the said company can be proceeded further or is
required to be stayed till the validity of the said Notification.

   6. Few facts are necessary for the purpose of determination of the present
group of petitions. The respondent No. 2, DLF Universal Limited (hereinafter
referred to as "DLF") entered into a contract with the petitioner of Special
Civil Application No. 9710 of 2004, Birla VXL and the said Birla VXL placed 3
purchase orders upon DLF in the month of December 1994 for its Chemical
Division. It appears that during performance of the contract certain disputes
arose between DLF and Birla VXL pursuant to which DLF invoked the Arbitration
Act contained in the said purchase orders and DLF sent a notice invoking
arbitration agreement to Birla VXL. In the meanwhile vide order dated 20th
October 1999 this Court sanctioned a scheme of arrangement proposed between
Birla VXL and SCL whereunder the Chemical Division of the Birla VXL was merged
into SCL and accordingly it was transferred and vested in SCL. DLF filed a
Petition No. 5 of 2002 under Section 11 of the Act for appointment of Arbitrator
before this Court and Birla VXL as well as SCL were also parties to the said
arbitration petition. The Nominee to Hon'ble the Chief Justice of this Court
vide order dated 29.10.2002 was pleased to appoint Justice K. Ramamoorthy (Retd)
as Sole Arbitrator. It is the case of the respective petitioners that while
appointing the respondent No. 1 as Sole Arbitrator liberty was reserved to raise
their preliminary contentions before the learned Sole Arbitrator. It appears
from the record that being aggrieved and dissatisfied with the aforesaid
appointment and the order passed in Arbitration Petition No. 5 of 2002 the SCL
had preferred Special Civil Application No. 460 of 2003 before this Court and
the learned Single Judge of this Court vide order dated 17th March 2003
dismissed the said Special Civil Application against which a Letters Patent
Appeal was preferred which was subsequently withdrawn. It appears that
thereafter the learned Sole Arbitrator issued notice dated 6.1.2003 to the
parties to appear for a preliminary hearing on 28.1.2003. However as there was a
stay granted by this Court the matter was adjourned. However, in view of the
dismissal of the aforesaid Special Civil Application No. 460 of 2003 and
vacation of the interim relief the Sole Arbitrator once again issued a notice
dated 22.4.2003 directing the parties to attend for a preliminary hearing on
27.5.2003 and the matter was adjourned to 11.8.2003 for filing claim statement
and reply thereto and for admission/denial of documents. It is the case of the
petitioner SCL that in the meantime the Labour and Employment Department of
Government of Gujarat by Notification dated 5.6.2003 declared the SCL to be a
Relief Undertaking under the BRU Act and according to the petitioner considering
Section 4 of the BRU Act the rights, privileges, obligations and liabilities
(other than those liabilities etc., towards its employees) occurred or incurred
before 5th June 2003 and any remedy for enforcement thereof is required to be
suspended and the proceedings relating thereto pending before any Court,
Tribunal, Officer or Authority is required to be stayed during one year
commencing from 5th June 2003 and ending on 4th June 2004 and that thereafter
the said notification has been renewed till 4.6.2005. It is the case of the
petitioner of Special Civil Application No. 7528 of 2004, i.e., SCL that they
preferred an application under Section 16 of the Arbitration Act before the
learned Sole Arbitrator stating that pursuant to the scheme of arrangement
between Birla VXL and SCL all liabilities of Chemical Division of Birla VXL came
to be vested in the petitioner and the DLF ought to have sent the notice
invoking arbitration to the SCL. The primary and mandatory requirement of the
Arbitration Act was not challenged by DLF and thus arbitral proceedings before
the respondent No. 1 Sole Arbitrator were not maintainable against SCL. It also
appears from the record that SCL also preferred an application under Section 20
of the Arbitration Act for change of venue of arbitration to Porbandar in terms
of Clause 15 of the purchase orders as the arbitration proceedings were being
conducted at New Delhi. The petitioner SCL also preferred an application under
Section 16 of the Arbitration Act for stay of arbitral proceedings in view of
the fact that SCL being declared as a Relief Undertaking under the BRU Act. The
learned Sole Arbitrator rejected all the above three applications by its order
dated 20.5.2004 and therefore the petitioner has preferred the Special Civil
Application under Article 226 of the Constitution of India for the aforesaid
reliefs.

   6.1 It appears from the record of Special Civil Application No. 9710 of 2004
that petitioner of the said Special Civil Application Birla VXL also moved an
application under Section 16 of the Arbitration Act before the Sole Arbitrator
for a declaration that there is no existing arbitration agreement between Birla
VXL and DLF and that in absence of any arbitration agreement between Birla VXL
and DLF the learned Sole Arbitrator does not have any jurisdiction relating to
the present arbitration proceedings qua Birla VXL and it was further prayed to
delete Birla VXL's name from the array of parties with regard to claim filed by
DLF and it is also further prayed for rejection of DLF's claim against Birla
VXL. The aforesaid application and the prayer was made by Birla VXL contending
inter alia that in view of sanction of the scheme by this Court demerging the
Chemical Division of Birla VXL and transferring the Chemical Division of Birla
VXL to SCL all assets and liabilities of the Chemical Division came to be
transferred to SCL and with the sanction of the scheme of demerger between Birla
VXL and SCL by the Hon'ble Gujarat High Court Saurashtra Chemicals stand
substituted in the contract with DLF and consequently with effect from 1.7.1998
there is no privity of contract between DLF and Birla VXL. The aforesaid
application also came to be dismissed by the learned Sole Arbitrator by order
dated 20th May 2004 against which the petitioner Birla VXL has preferred the
present Special Civil Application No. 9710 of 2004 under Article 226 of the
Constitution of India.

   6.2 It appears from the record of Special Civil Application No. 16075 of 2003
that the dispute is between one Krupp Industries (I) Ltd and the SCL and the
said Krupp Industries (I) Ltd., [hereinafter referred to as "KIL"] had entered
into a contract with the SCL by Purchase Order dated 1.6.1994. As there was a
dispute between the said KIL and the SCL the Arbitration Clause was invoked and
late Mr. Justice N.J. Pandya (Retd.) was appointed as Sole Arbitrator; during
the pendency of the arbitration proceedings between the KIL and the SCL before
the Sole Arbitrator, by notification dated 5.6.2003 issued by the Labour and
Employment Department, Government of Gujarat, dated 5.6.2003 the SCL came to be
declared as a relief undertaking under the BRU Act which is extended upto
4.6.2005 and as according to the SCL by virtue of Section 4 of the BRU Act,
rights, privileges, obligations, liabilities (other than those liabilities etc.,
towards its employees) occurred or incurred before 5th June 2003 any remedy for
the enforcement thereof shall be suspended and proceedings relating thereto
pending before any Court, Tribunal, Officer or Authority shall be stayed during
one year commencing from 5th June 2003 and ending on 4th June 2004 which has
been extended till 4.6.2005 the arbitration proceedings before the Sole
Arbitrator was required to be stayed during the period of the said notification;
and therefore the SCL submitted an application under Section 16 of the
Arbitration Act before the Sole Arbitrator for staying the arbitration
proceedings and the Sole Arbitrator by his order dated 23.9.2003 rejected the
application of the SCL for such arbitration proceedings which is challenged by
the petitioner SCL before this Court by way of present Special Civil Application
No. 16075 of 2003 under Article 226 of the Constitution of India.

   7. Heard Shri Mihir Thakore, learned Senior Advocate for M/s. Singhi &
Company appearing for Saurashtra Chemicals Ltd; Shri KS Nanavati, learned Senior
Advocate for M/s. Trivedi & Gupta for Birla VXL Limited; Shri M.L. Verma,
learned Senior Advocate with Shri Anil Sheth for DLF Universal Limited, and Shri
P.M. Thakkar, learned Senior Advocate for Krupp Industries (I) Ltd.

   8. Shri Mihir Thakore, the learned Senior Advocate appearing on behalf of SCL
has relied upon the following decisions/judgments in support of his contention
and submission that a writ can lie to an Arbitrator appointed by the parties;

     (1) Andi Mukta Sadguru Shree Muktajeevandas Swami Suvarna Jayanti Mahotsav
Smarak Trust and Ors. v. V.R. Rudani And Ors., reported in (1989) 2 SCC 691;

     (2) ONGC Ltd. v. Saw Pipes Ltd, reported in (2000) 5 SCC page 705;

     (3) Anuptech Equipments Private Ltd. v. Ganpati Co-op. Housing Society
Ltd., Mumbai and Ors., reported in AIR 1999 Bombay 219;

     (4) Indian Oil Corporation Limited v. ATV Projects India Limited and Anr.,
reported in 2004 (2) Arbitration Law Report Page 432 (Delhi High Court);

     (5) Subash Singh & Co. v. Girnar Fibres Ltd., reported in 2000(1)
Arbitration Law Report, Page 430 (Punjab & Haryana) Para 10 at Page 439.

   8.1 Shri Thakore, learned Senior Advocate has submitted that the writ can be
issued to any person or authority so long as he performs public duty
irrespective of whether it is a "State" under Article 12 of the Constitution of
India. Relying upon paragraphs 15, 20 and 22 of the Judgment of the Hon'ble
Supreme Court in the case of Andi Mukta Sadguru Shree Muktajeevandas Swami
Suvarna Jayanti Mahotsav Smarak Trust and Ors. v. V.R. Rudani And Ors. (Supra),
it is submitted that against the order passed by the Arbitrator under the
provisions of the Arbitration Act a petition under Article 226 of the
Constitution of India is maintainable. It is further submitted that the Arbitral
Tribunal constituted as per the provisions of the Arbitration Act owes a
positive obligation towards the parties to the arbitration and such obligation
is cast on the Tribunal both by contract and by statute. Relying upon Section
28(1)(a) of the Arbitration Act, it is submitted that it imposes a duty on the
Arbitral Tribunal to try and decide the dispute in accordance with the
substantial law for the time being in force in India and for that purpose Shri
Thakore has relied upon the judgment in the case of ONGC Ltd v. Saw Pipes Ltd
(supra) more particularly paras 14, 15 and 31 of the said Judgment. It is
therefore submitted that it is a duty cast upon an Arbitration to act within the
parameters of the public policy of the Government of India. It is further
submitted that an Arbitral Tribunal owes a duty under Section 28(1) of the
Arbitration Act to act in accordance with the terms of the Act and any order of
an Arbitrator which is contrary to the terms of the contract would be in
contravention to the said provisions of the Act and thereby contrary to the
public policy of India and/or against the established substantial law of India.
It is also further submitted that an Arbitral Tribunal is required to adjudicate
upon civil rights of the parties, which otherwise would be adjudicated upon by
the Courts of India, under the relevant statutes and therefore the Arbitral
Tribunal discharges a judicial function, which squarely falls within the ambit
of phrase "public duty". Section 34 and Section 37 of the Arbitration Act
clearly envisage the Legislative intent that an Arbitral Tribunal being under
the supervisory control of the Courts of India it cannot be contended that an
Arbitral Tribunal, though appointed by the agreement between the parties, is not
discharging any "public function". It is further submitted an Arbitral Tribunal
owes a duty to the parties to determine whether a claim is barred by limitation
under the provisions of the Limitation Act, 1963. Section 27(5) of the Act
provides that persons guilty of contempt to the Arbitral Tribunal shall be
subject to the like disadvantages, penalties and punishments by order of the
Court on the representation of the Arbitral Tribunal as they would incur for the
like offences any suits tried before the Court. It is also further submitted
that apart from the public duties which an Arbitral Tribunal owes the Arbitral
Tribunal also performs public functions. For that purpose, provisions of Section
36, Section 20(2), Section 34 and Section 37 of the Arbitration Act are relied
upon. It is submitted that Section 36 of the Act provides that on expiry of time
for making an application to set aside an arbitral award or on rejection of such
an application, the said award shall be enforced under the provisions of the
Code of Civil Procedure, 1908 in the same manner as if it were a decree of the
Court. It is further submitted that an Arbitral Tribunal is required to
adjudicate upon the civil rights of the parties, which otherwise would be
adjudicated upon by the Courts of India under the relevant statutes. Thus an
Arbitral Tribunal discharges a judicial function. It is also further submitted
that even otherwise the Arbitral Tribunal is under supervisory control of the
Courts as defined under Section 2(1)(e) of the Arbitration Act which in turn
under the appellate, revisional and supervisory jurisdiction of the High Court
and consequently amenable to the writ under Article 226 of the Constitution of
India. For that purpose, Shri Thakore has also relied upon the judgment of the
Bombay High Court in the case of Anuptech Equipments Private Ltd. v. Ganpati Co-
op. Housing Society Ltd., Mumbai and Ors., (supra), by which the Bombay High
Court has entertained the writ petition against the decision of the Arbitral
Tribunal. Shri Thakore has relied upon Para 17 of thereof which reads as under;

     17. The question that will arise is whether this Court can exercise its
extra ordinary jurisdiction under Article 226 of the Constitution or Article
227. Article 227 is the power of superintendence of this Court over Tribunals.
For that purpose it will have to be examined whether the Arbitral Tribunal as
constituted under the Act of 1996 is a Tribunal over which this Court would have
supervisory jurisdiction. the other aspect of the matter would be to consider
whether the Arbitral Tribunal would come under the expression of "other person"
and as such a writ could be issued to such person or authority under Article
226. Before proceeding to examine the matter it would be advisable to consider
some judgments of the Apex Court in so far as appointment of Arbitrators are
concerned. At this outset let me make it clear that a distinction has been drawn
between a statutory Tribunal and a Tribunal appointed by consent of parties. It
is in that context the need to examine the decisions rendered under Section 10A
of the Industrial Disputes Act, 1947. The first such judgment before Section 10A
was amended is in the case of Engineering Mazdoor Sabha v. Hind Cycles Ltd. AIR
1963 SC 874. The question before the Apex Court was whether against an award by
an Arbitrator appointed under Section 10A of the I.D. Act, an appeal could lie
to the Apex Court under Article 136. An appeal lies only from order of Courts or
Tribunals. The question was whether the Arbitrator appointed under Section 10A
was a Tribunal. Gajendragadkar, J., as the learned Chief Justice then was,
observed as under (At Pp. 881-882 of AIR):-

     "Article 226 under which a writ of certiorari can be issued in an
appropriate case is, in a sense, wider than Article 136, because the power
conferred on the High Courts to issue certain writs is not conditioned or
limited by the requirement that the said writs can be issued only against the
orders of Courts or Tribunals. Under Article 226(1), an appropriate writ can be
issued to any person or authority, including in appropriate cases any
Government, within the territories prescribed. Therefore, even if the arbitrator
appointed under Section 10A is not a Tribunal under Article 136 in a proper
case, a writ may lie against his award under Art. 226".

     The next judgment is in the case of Rohtas Industries Ltd. v. Rohtas
Industries Staff Union, AIR 1976 SC 425. A reference was made under Section 10A
of the Industrial Disputes Act, 1947. An award came to be passed. The said Award
when challenged before the High Court of Calcutta was rejected in so far as
denial of wages during the strike period. However, the Court quashed part of the
award which directed payment of compensation by the workers to the management.
The company came in appeal against the said judgment. Before the Apex Court
various challenges were raised. We are concerned with the first challenge which
was formulated as under:-

     "An award under Section 10A of the Act Saviours of a private arbitration
and is not amenable to correction under Article 226 of the Constitution."

     To the same argument there was an additional argument which ran as under:-

     "Even if there be jurisdiction, a discretionary desistence from its
exercise is wise, proper and in consonance with the canons of restraint this
Court has set down"

     While answering the said issue the Apex Court has observed as under [AIR
1976 SC 425, Para 9]:-

     "The expansive and extraordinary power of the High Courts under Article 226
is as wide as the amplitude of the language used indicates and so can affect any
person --even a private individual--and be available for any (other) purpose,
even one for which another remedy may exist. The amendment to Article 226 in
1963 inserting Article 226(1-A) reiterates the targets of the writ power as
inclusive of any person by the expressive reference to "the residence of such
person".

     The Court examined the judgment in Engineering Mazdoor Sabha (AIR 1963 SC
874) and thereafter proceeded to answer as under (At P. 429 of AIR 1976 SC):-

     "We agree that the position of an arbitrator under Section 10A of the Act
(as it then stood) vis a vis Article 227 might have been different. Today,
however, such an arbitrator has power to bind even those who are not parties to
the reference or agreement and the whole exercise under Section 10A as well as
the course of the force of the award on publication derives from the statute. It
is legitimate to regard such an arbitrator now as part of the methodology of the
sovereign's dispensation of justice, thus falling within the rainbow of
statutory Tribunals amenable to judicial review. This observation made en
passant by us is induced by the discussion at the bar and turns on the
amendments to Section 10A and cognate provisions like Section 23, by Act XXXVI
of 1964".

     Relying on these judgments it was sought to be argued that the arbitral
Tribunal under the Act of 1996 would be such other person to whom a writ could
go under Article 226 of the Constitution. Before proceeding to consider that
aspect of the matter, it is essential to refer to the subsequent judgment of the
Apex Court in the case of Raipur Development Authority v. Chokhamal Contractors,
AIR 1990 SC 1426. The judgment of Rohtas Industries (AIR 1976 SC 425) came up
for consideration before the Apex Court in the case of Raipur Development
Authority (supra). It was sought to be contended that under the Act of 1940 the
Arbitrators were bound to give reasons as that was a requirement of natural
justice and in the event reasons were not given the Award was liable to be
remitted or set aside. In other words the Apex Court was called upon to consider
the question whether an arbitrator appointed under the Act of 1940 was
exercising quasi judicial powers and as such on failure to give reasons the
award was liable to be set aside. Reliance was also placed in the case of Rohtas
Industries. (AIR 1976 SC 425). the same was distinguished by the Apex Court by
observing as under (Para 32 of AIR 1990 SC 1426):-

     "A distinction was thus made between statutory arbitrations under Section
10A of the Industrial Disputes Act and private arbitrations. It is not necessary
to refer to the other cases cited before us which have a bearing on Section 10A
of Industrial Disputes Act, 1947".

     What is important to bear in mind are the following observations in para 37
of the judgment which are reproduced hereinbelow :-

     "There is however, one aspect of non-speaking awards in non-statutory
arbitrations to which Government and Governmental authorities are parties that
compel attention. The trappings of a body which discharges judicial functions
and requires to act in accordance with law with their concomitant obligations
for reasoned decisions are not attracted to a private adjudication of the nature
of arbitration as the latter, as we have noticed earlier, is not supposed to
expert the State's sovereign judicial power".

     It is thus clear from the said judgment that the Apex Court came to the
conclusion that trappings of a body which discharges judicial functions and
requires to act in accordance with law with their concomitant obligation for
reasoned decisions are not attracted to a private adjudication of the nature of
arbitration as the latter is not supposed to exept the State's sovereign
judicial power. Before proceeding further it will also be necessary to refer to
the judgment relied upon by the respondents in the case of Smt. Rukmanibai Gupta
v. Collector, Jabalpur, (1980) 4 SCC 556: (AIR 1981 SC 479). In that case the
question before the Apex Court was that in case of a Governmental contract, if
there were difference or dispute the matter was left to the State for its final
decision. It was held that such a clause was a clause of arbitration. A petition
came to be filed challenging the said award under Article 226 of the
Constitution of India. The High Court dismissed the Writ Petition on the ground
that the award could not be challenged by way of Article 226 but only under the
provisions of the Arbitration Act. While answering the question in paragraph 10
the Apex Court held that the reliefs sought by the appellant by invoking the
extraordinary jurisdiction of the High Court under Article 226 could have been
obtained by proceeding in accordance with the relevant provisions of the
Arbitration Act. In that situation, if the High Court had declined to entertain
the writ petition, no exception could be taken to it as the writ jurisdiction of
the High Court under Article 226 of the Constitution is not intended to
facilitate avoidance of obligation voluntarily incurred.

     Therefore, considering the above judgments can it still be said that this
Court can exercise the extraordinary jurisdiction under Article

     226. As pointed out earlier, a writ can go to any person or authority.
Under the Act of 1940 arbitrations under the Arbitration Act, 1940 have been
held to be in the nature of private arbitrations and not in exercise of the
State's sovereign judicial power. A distinction has been made between the
provision for statutory arbitration and for private arbitration. Does the Act of
1996 make any distinction in so far as this aspect is concerned. If the Act is
in pari materia with the Act of 1940 in that event it will not be possible to
hold that a writ could go under Article 226 of the Constitution. To my mind the
Arbitration & Conciliation Act, 1996 has made a departure and an arbitral
Tribunal under the Act of 1996 can be said to be a person if not a Tribunal to
whom a writ could go. Even in Engineering Mazdoor Sabha (AIR 1963 SC 874)
(supra) the Apex Court noted that the Arbitration under Section 10A is different
from a private Arbitration. The following observations in para.16 are relevant
:-

     "(16). It may be conceded that having regard to several provisions
contained in the Act, and the rules framed thereunder, an arbitrator appointed
under S. 10A cannot be treated to be exactly similar to a private arbitrator to
whom a dispute has been referred under an arbitration agreement under the
Arbitration Act. The arbitrator under S. 10A is clothed with certain powers, his
procedure is regulated by certain rules and the award pronounced by him is given
by statutory provisions a certain validity and a binding character for a
specified period. Having regard to these provisions, it may perhaps be possible
to describe such an arbitrator, as in a loose sense, a statutory arbitrator and
to that extent, the argument of the learned Solicitor General may be rejected.
But the fact that the arbitrator under Section 10A is not exactly in the same
position as a private arbitrator, does not mean that he is a Tribunal under
Article 136. Even if some of the trappings of a Court are present in his case,
he lacks the basic, the essential and the fundamental requisite in that behalf
because is not invested with the State's inherent judicial power. As we will
presently point out, he is appointed by the parties and the power to decide the
dispute between the parties who appoint him is derived by him from the agreement
of the parties and from no other source. The fact, that his appointment once
made by the parties is recognised by Section 10A and after his appointment he is
clothed with certain powers and has thus, no doubt, some of the trappings of a
Court, does not mean that the power of adjudication which he is exercising is
derived from the State and so, the main test which this Court has evolved in
determining the question about the character of an adjudicating body is not
satisfied. He is not a Tribunal because the State has not invested him with its
inherent judicial power and the power of adjudication which he exercises is
derived by him from the agreement of the parties. His position, thus, may be
said to be higher than that of a private arbitrator and lower than that of a
Tribunal. A statutory Tribunal is appointed under the relevant provisions of a
statute which also compulsorily refers to its adjudication certain classified
classes of disputes. That is the essential feature of what is properly called
statutory adjudication or arbitration. That is why we think the agreement
strenuously urged before us by Mr. Pal that a writ of certiorari can lie against
his award is of no assistance to the appellants when they contend that such an
arbitrator as a Tribunal under Article 136."

     The reasons are as under:- Reading of Section 8 with Section 5 of the Act
of 1996 in cases where there is an arbitration agreement, no judicial authority
can intervene except when so provided in the Act. The jurisdiction is exclusive.
Section 10 controls the composition of the Arbitral Tribunal. Section 16 confers
a power upon the Tribunal to decide on its own jurisdiction. Section 17 has
conferred a power on the Tribunal to make an order as an interim measure for
protection of the subject matter of a dispute. Under Section 37 such an order
granting or rejecting interim relief is subject to appeal to the Court. Under
sub-section (4) of Section 19 of the Arbitral Tribunal has been given power to
determine the admissibility, relevance, materiality and weight of any evidence.
Under Section 25 the Tribunal can terminate the proceedings if claims statement
is not filed within the time stipulated under Section 23 and if no sufficient
cause is shown. Under proviso to Section 24(1) the Tribunal is bound to grant
oral hearing on request by the parties. More important is sub-section (5) of
Section 27 if persons are guilty of any contempt of the Arbitral Tribunal during
the conduct of arbitral proceedings they are subject to the like disadvantages,
penalties and punishments by order of the Court on the representation of the
arbitral tribunal as they would incur for like offences in suits tried before
the Court. In the Act of 1940 there was no specific reference to contempt of
arbitral Tribunal which has been conferred by Section 27 of the Act of 1996.
Once a person can be punished for contempt of the Tribunal, which can be done
where the Act tends to bring the administration of justice into disrespect or
interference with the administration of justice, shows that such a 'Tribunal'
discharges the inherent judicial functions of the State. By virtue of Section 36
the Award is deemed to be a decree which can be enforced under the Act unlike
the Act of 1940 when it had to be made a decree by the order of the Court. Under
Section 37(2), an Appeal is provided for against certain orders made by the
Arbitral Tribunal. In other words its orders are appealable. To my mind on
consideration of those provisions even if it be held that the Tribunal is not a
Tribunal within the meaning of Article 226 of the Constitution, it would
nevertheless be a person to whom a writ could go under Article 226 of the
Constitution. I am, therefore, clearly of the opinion that where a remedy is not
available to an aggrieved person and considering Section 5 of the Arbitration
Act of 1996 this Court can exercise its extraordinary jurisdiction under Article
226 of the Constitution. In passing I may mention that this exercise had to be
undergone in view of non-availability of remedy to aggrieved parties. It is true
also that one of the objectives of the Act of 1996 is to minimise the
supervisory role of Courts. On the other hand proceedings in arbitration involve
the Civil rights of the parties. It is a cardinal principle of our jurisprudence
that no man should be left without a remedy. Judicial review cannot be made
dependent on men who pass orders. Hierarchy of Courts is an answer to that."
Shri Thakore has also relied upon the order passed by the learned Single Judge
of this Court dated 30th September 2004 rendered in Special Civil Application
No. 2673 of 2003 (Unreported Judgment) in the case between ONGC Ltd. v. Samarth
Builders by which the learned Single Judge has entertained the writ petition
against an Arbitrator appointed by agreement of parties.

   9. Shri M.L. Varma, learned Senior Advocate appearing on behalf of DLF has
relied upon the following judgments in support of his submission that against an
order passed by a Sole Arbitrator petition under Article 226 of the Constitution
of India is not maintainable:

     (1) Balkishen Gulzari Lal v. Panna Lal Sud and Ors., reported in AIR 1973
Delhi 108;

     (2) State of Orissa v. Lakshminarayan Samantaray and Anr., reported in AIR
1982 Orissa 93;

     (3) M. Moideen Kutty v. Divisional Forest Officer, Nilambur and Ors.,
reported in 1988 (2) ALR Page 37;

     (4) R. v. Dispute Committee of the National Joint Council and Ors.,
reported in 1953 (1) All England Reports. (Q.B.D.) 327;

     (5) Executive Committe of Vaish Degree College, Shamli and Ors. v. Lakshmi
Narain and Ors., reported in (1976) 2 SCC Page 58;

     (6) General Manager J & K Cooperative Supply and Marketing Federation v.
Rama Rice & General Mills, reported in (1994) 1 ALR Page 259;

     (7) Dharma Prathisthanan v. Madhok Construction Pvt. Ltd., reported in
(2004) 3 ALR Page 432 (SC);

     (8) Veena Ojha v. U.P. Stock Exchange Association Ltd. and Ors., reported
in (2000) 1 ALR Page 19 (Allahabad);

     (9) State of U.P. and Ors. v. Bridge and Roof Co. (India) Ltd., reported in
(1996) 6 SCC Page 22.

   9.1 Relying upon the judgment of the Delhi High Court in the case of
Balkishen Gulzari Lal v. Panna Lal Sud and Ors., (supra), it is submitted that
any Arbitrator appointed under the Arbitration Act is not amenable to High
Court's jurisdiction under Article 226 of the Constitution of India.It is
submitted that an arbitration is an arrangement for investigation and
determination of a matter between the contesting parties by one or more
unofficial persons chosen by the parties and such an Arbitrator appointed under
the Arbitration Act is a private Arbitrator. Merely because the Courts have been
given power under the Arbitration Act to deal with the Arbitrator or his award
it does not mean that the Arbitrator is a statutory Arbitrator in the sense of
being a public body to whom either the arbitration has necessarily to be
referred to or in the sense that his award by itself has been given a finality
and recognition of a stature. Relying upon the aforesaid Judgment, it is
submitted that the Arbitrator appointed under the Arbitration Act is not
amenable to jurisdiction of High Court under Article 226 and therefore a writ
cannot be issued. Relying upon the judgment of the Orissa High Court in the case
of State of Orissa v. Lakshminarayan Samantaray and Anr. (supra), it is
submitted that the Arbitrator is not amenable to the extraordinary jurisdiction
of the High Court. Relying upon the judgment of the Kerala High Court in the
case of M. Moideen Kutty v. Divisional Forest Officer, Nilambur and Ors.
(supra), it is submitted that an arbitrator being a private firm agreed upon
between the parties no writ can lie against an award and the only remedy is what
has been provided in the Arbitration Act. Relying upon the judgment of the
Hon'ble Supreme Court in the case of Executive Committe of Vaish Degree College,
Shamli and Ors. v. Lakshmi Narain and Ors.,(supra), it is submitted that as held
by the Hon'ble Supreme Court "the adoption of certain statutory provisions by
itself is not sufficient to clothe the institution with a statutory character
and the institution concerned must owe its very existence to a statute which
would be the fountainhead of its powers." It is also further submitted that
arbitration proceeding pending between the private arbitrator under private
agreement is not subject to writ petition and that the Arbitral Tribunal which
is creature of private agreement between the parties, derives its authority from
the agreement and it is not a court of law, and its orders are not judicial
orders and is not performing any judicial function. It is also further submitted
that the Tribunal though being subject to provisions of Arbitration Act is not a
statutory body and private arbitration is not a statutory arbitration created by
statute and is merely governed by a statute. For that purpose, Shri Varma has
relied upon paragraph Nos. 7, 12 and 19 of the Judgment of the Hon'ble Supreme
Court in the case of Dharma Prathisthanan v. Madhok Construction Pvt. Ltd.,
(supra), which read as under;

     "7. .........The Law of Arbitration does not make the Arbitration an
adjudication by a statutory body but it only aids in implementation of the
Arbitration contract between the parties which remains a private adjudication by
a forum consensually chosen by the parties and made on a consensual reference."

     "12. ........According to Russell (Arbitration, 20th Edition, P.104), "An
Arbitrator is neither more nor less than a private Judge of a private Court
(called an Arbitral Tribunal) who gives a private judgment (called an Award). He
is a Judge in that a dispute is submitted to him....."

     "19. .........The Constitution Bench in Khardah Company Ltd. v. Raymon &
Co. (India) Private Ltd., AIR 1962 SC 1810, decided the issue from the view of
jurisdictional competence and held that what confers jurisdiction on the
Arbitrator to hear and decide a dispute is an Arbitration agreement and where
there is no such agreement there is an initial want of jurisdiction which cannot
be cured even by acquiescence. It is clearly spelled out from the law laid down
by the Constitution Bench that the Arbitrators shall derive their jurisdiction
from the agreement and consent."

   Relying upon the judgment of the Hon'ble Supreme Court in the case reported
in AIR 2004 S.C. Page 1344, more particularly Para 41 of the said Judgment, it
is submitted an Arbitral Tribunal is not a Court of law and its functions are
not judicial functions and the jurisdiction of the Arbitrator being confined by
the 4 corners of the agreement, he passed only such an order, which may be
subject matter of reference. From the above it is submitted that if the
arbitration is arising from an arbitration clause in a private contract which is
not a statutory arbitration nor an Arbitrator a Court it does not perform a
judicial function. As the arbitration is before a private firm flowing from
private agreement of the private parties not the arbitrator is not performing
judicial function. Thus the writ petition is not maintainable against the order
of the Arbitrator nor can the arbitration proceedings be stalled. The stalling
of the arbitration proceedings is against the object and scheme of the Act. It
is a settled law that a writ petition against private arbitration proceeding is
not maintainable.

   10. Now, considering the aforesaid submissions, what is required to be
considered is whether against an award passed by the Arbitral Tribunal under the
provisions of the Arbitration Act petition under Article 226 of the Constitution
of India is maintainable or not. The Hon'ble Supreme Court, in the case of Andi
Mukta Sadguru Shree Muktajeevandas Swami Suvarna Jayanti Mahotsav Smarak Trust
and Ors. v. V.R. Rudani And Ors. (Supra), in Para 15 has held as under;

     "15. If the rights are purely of a private character no mandamus can issue.
If the management of the college is purely a private body with no public duty
mandamus will not lie. These are two exceptions to mandamus. But once these are
absent and when the party has no other equally convenient remedy, mandamus
cannot be denied. It has to be appreciated that the appellants-trust was
managing the affiliated college to which public money is paid as government aid.
Public money paid as government aid plays a major role in the control,
maintenance and working of educational institutions. the aided institutions like
government institutions discharge public function by way of imparting education
to students. They are subject to the rules and regulations of the affiliating
University. Their activities are closely supervised by the University
authorities. Employment in such institutions, therefore, is not devoid of any
public character. So are the service conditions of the academic staff. When the
University takes a decision regarding their pay scales, it will be binding on
the management. The service conditions of the academic staff are, therefore, not
purely of a private character. It has super added protection by university
decisions creating a legal right duty relationship between the staff and the
management. When there is existence of this relationship mandamus cannot be
refused to the aggrieved party."

   In Para 20 of the said Judgment, it is also held and observed as under;

     "20. The term "authority" used in Article 226, in the context, must receive
a liberal meaning unlike the term in Article 12. Article 12 is relevant only for
the purpose of enforcement of fundamental rights under Article 32. Article 226
confers power on the High Courts to issue writs for enforcement of the
fundamental rights as well as non-fundamental rights. The words "any person or
authority" used in Article 226 are, therefore, not to be confined only to
statutory authorities and instrumentalities of the State. They may cover any
other person or body performing public duty. The form of the body concerned is
not very much relevant. What is relevant is the nature of the duty imposed on
the body. The duty must be judged in the light of positive obligation owed by
the person or authority to the affected party. No matter by what means the duty
is imposed, if a positive obligation exists mandamus cannot be denied."

   Para 22 of the said Judgment reads as under;

     "22. Here again we may point out that mandamus cannot be denied on the
ground that the duty to be enforced is not imposed by the statute. Commenting on
the development of this law, Professor de Smith states : "To be enforceable by
mandamus a public duty does not necessarily have to be one imposed by statute.
It may be sufficient for the duty to have been imposed by charter, common law,
custom or even contract." We share this view. The judicial control over the fast
expanding maze of bodies affecting the rights of the people should not be put
into watertight compartment.It should remain flexible to meet the requirements
of variable circumstances. Mandamus is a very wide remedy which must be easily
available "to reach injustice wherever it is found". Technicalities should not
come in the way of granting that relief under Article 226. We, therefore, reject
the contention urged for the appellants on the maintainability of the writ
petition."

   As held by the Hon'ble Supreme Court in the case of ONGC Ltd (supra), the
Arbitral Tribunal has to try and decide the dispute in accordance with the
substantial law for the time being in force and that an Arbitrator has to act
within the parameters of the public policy of India.

   10.1 It is required to be noted that an Arbitral Tribunal is required to
adjudicate upon the civil rights between the parties which otherwise would be
adjudicated upon by the courts of India under the relevant statutes. An Arbitral
Tribunal discharges judicial function and the award passed by the Tribunal is
subject to challenge before the Civil Court. An Arbitral Tribunal owes a duty to
the parties to determine whether the term is barred by limitation under the
provisions of the Limitation Act or not. As per Section 36 of the Act, the award
can be enforced under the provisions of Code of Civil Procedure, 1908, in the
same manner as if it were a decree of the Court. Considering the aforesaid facts
and circumstances and the scheme of the Arbitration Act of 1996 and the
aforesaid judgments, it cannot be said that against an order passed by the
Arbitral Tribunal under the provisions of the aforesaid Act of 1996 petition
under Article 226 of the Constitution of India is not maintainable. Under the
circumstances, I am not in agreement with the view taken by the other High
Courts that the petition under Article 226 of the Constitution of India against
the order passed by the Arbitral Tribunal is not maintainable. The answer to the
first question is in affirmative.

   11. Now, the second question, which is required to be considered, is whether
against an passed by an Arbitral Tribunal a petition under Article 226 of the
Constitution of India requires to be entertained or not. The learned Advocates
appearing on behalf of the respective petitioners , relying upon the judgments
which are stated hereinabove which are cited while considering the question with
regard to maintainability of the petition under Article 226 of the Constitution
of India, have also submitted that for the said reasons the petition under
Article 226 is also required to be entertained. It is submitted that in the
present case so far as 'SCL' is concerned in absence of any notice served upon
the SCL invoking the arbitration clause the learned Sole Arbitrator has no
jurisdiction to proceed further with the arbitration proceedings and therefore
the petition is required to be entertained. It is also further submitted that in
view of the Notification issued under the provisions of the BRU Act declaring
the SCL as a relief undertaking the arbitration proceedings before the
Arbitrator is required to be stayed and when the application was submitted under
Section 16 of the Arbitration Act to stay the proceedings which came to be
dismissed by the Sole Arbitrator which is challenged in the present Special
Civil Applications, the present group of petitions are required to be
entertained. It is also further submitted by SCL that as per the Arbitration
Clause the venue of the arbitration would be at Porbandar and the arbitration
proceedings are not maintainable as the same are going on at New Delhi, for
which an application was given under Sections 20 and 21 of the Arbitration Act
which came to be dismissed and the same is also challenged in the present
Special Civil Applications. Therefore considering the provisions of Section 20
and 21 of the Arbitration Act it is requested to entertain the petition under
Article 226 of the Constitution of India. It is also further submitted on behalf
of Birla VXL that in view of the demerger of Chemical Division of Birla VXL from
SCL on sanctioning the scheme by this Court there is no privity of contract in
existence between Birla VXL and DLF and therefore the arbitration proceedings
against Birla VXL are not required to be continued and thus the learned Sole
Arbitrator has no jurisdiction to decide the dispute between Birla VXL and DLF,
and as an application preferred under Section 16 of the Arbitration Act came to
be dismissed, the present Special Civil Applications have been filed and
therefore it is requested to entertain the petitions under Article 226 of the
Constitution of India as they go to the root of jurisdiction of the learned Sole
Arbitration in proceeding with the arbitral proceedings.

   11.1 Shri Verma, learned Senior Advocate appearing on behalf of DLF has
relied upon the following decisions in support of his submission that assuming
without admitting that the writ petition under Article 226 of the Constitution
of India against the order passed by the Arbitral Tribunal is maintainable but
the same should not be entertained;

     (1) Konkan Railway Corporation Ltd., v. Mehul Construction Co.- (2000) 7
SCC 201;

     (2) New India Assurance Co. Ltd. v. Hanjer Fibres Ltd., - AIR 2003 Guj. 311
(F.B.);

     (3) BASF Styrenics Pvt. Ltd. v. Offshore Industrial Construction Pvt.Ltd.
and Anr. - 2003 (3) Arb.L.R. 14 (Bom.D.B.) (Para 6, 10,11);

     (4) Assam Urban Water Supply & Sewage Board v. Subhas Project & Marketing
Ltd. and Anr. - 2003 (2) Arb.L.R. 301 (Gau.) (Para 9 to 13);

     (5) Babar ali v. UOI (D.B. Delhi);

     (6) Babar Ali v. Union of India - 2000 (2) SCC 178;

     (7) BHEL v. C.N. Garg - 2000 (3) Arb.L.R. 674 (D.B. Delhi);

     (8) National Buildings Construction Corporation Ltd. v. Antia Electricals
Pvt.Ltd. and Ors. - 2003 (2) Arb.L.R. 91;

     (9) M. Mohan Reddy v. Union of India and Ors., - 2000(1) Arb. L.R. 39
(A.P.);

     (10) Mangayarasi Apparels Pvt. Ltd. v. Sundram Finance Ltd., Madras; -
2002(3) Arb.L.R. 210 (Madras).

   Considering the Statement of Objects and Reasons of the Act of 1996 it is
submitted that the main objective of the Legislature was to minimise the
supervisory role of the Courts in the arbitral process, and considering the
provisions of Section 16 of the Act there is an adequate and proper remedy
provided to have the arbitral award set aside under Section 34 of the Act. It is
further submitted that considering the scheme of the Act more particularly
Section 16 of the Act if the Arbitral Tribunal holds that it has jurisdiction
such an order cannot be said to be illegal or without jurisdiction at that stage
and such an order can be challenged only in the manner laid down in sub-section
(5) and (6) of Section 16 i.e. after the proceedings are over and the award is
made. Therefore, it is requested not to entertain the present Special Civil
Applications.

   11.2 Considering the submissions made on behalf of the parties, the second
question, which is required to be considered is whether against the order passed
by the Arbitral Tribunal under Section 16 of the Act to proceed further with the
arbitration proceedings a petition under Article 226 of the Constitution of
India is required to be entertained or not.

   11.3 In deciding the said issue, it would be necessary to find out the true
intention of the Legislature in substituting the 1940 Act by the Act of 1996.
Prior to 1996 Act, the Arbitration Act of 1940, which was in force in India,
provided for domestic arbitration and no provision was there to deal with the
foreign awards. The increasing growth of global trade and the delay in disposal
of cases in Courts under the normal system in several countries made it
imperative to have the perception of an alternative dispute resolution system,
more particularly in the matter of commercial disputes. When the entire world
was moving in favour of a speedy resolution of commercial disputes, the United
Nations Commission on International Trade Law, way back in 1985 adopted UNCITRAL
Model Law of International Commercial Arbitration and since then a number of
countries have given recognition to that model in their Legislative systems.
With the said UNCITRAL Model Law in view, the present Arbitration and
Conciliation Act of 1996 has been enacted in India replacing Indian Arbitration
Act, 1940 which was the principal legislation on arbitration in the country that
had been enacted during the British rule. The Arbitration Act of 1996 provides
not only for domestic arbitration but spreads its sweep to international
commercial arbitration too. The Indian Law relating to the enforcement of
foreign arbitration awards provides for greater autonomy in the arbitral process
and limits judicial intervention to a narrower circumference than under the
previous law. As observed by the Hon'ble Supreme Court in the case of Konkan
Railway Corporation Ltd., (Supra) while interpreting the provisions of 1996 Act,
Courts must not ignore the objects and purpose of the enactment of 1996 Act. The
Hon'ble Supreme Court of India, in the aforesaid decision, has observed as
under;

     "A bare comparison of different provisions of the Arbitration Act, 1940
with the provisions of the Arbitration and Conciliation Act, 1996 would
unequivocally indicate that the 1996 Act limits intervention of the Court with
an arbitral process to the minimum and it is certainly not the legislative
intent that each and every order passed by an authority under the Act would be a
subject matter of judicial scrutiny of a Court of Law."

     The Hon'ble Supreme Court also further observed as under;

     "Obstructive tactics adopted by the parties in arbitration proceedings are
sought to be thwarted by an express provision".

     The Hon'ble Supreme Court further observed in the aforesaid decision that -

     "The provisions of the Act aim in achieving the sole objective of resolving
the dispute as expeditiously as possible so that trade and commerce are not
affected on account of litigation. The statement of objects and reasons of the
Act clearly envisages that the main objective of the Legislation was to minimise
the supervisory role of the Courts in the arbitral process."

     As held by the Hon'ble Supreme Court, in the case of Kvaerner Cementation
India Ltd. v. Bajrang Lal Aggarwal and Anr., reported in (2001) 6 SCC Page 265,
"A bare reading of Section 16 makes it explicitly clear that Arbitral Tribunal
has the power to rule on its own jurisdiction even without any objection with
respect to existence or validity of an arbitration agreement is raised and a
conjoint reading of sub-sections (2)(4)(6) of Section 16 would make it clear
that such a decision would be amenable to be assailed within the ambit of
Section 34 of the Act."

   11.4 The Bombay High Court in the decision in the case of BASF Styrenics Pvt.
Ltd. v. Offshore Industrial Construction Pvt. Ltd. and Anr. reported in 2003 (3)
Arb.L.R. 14, (supra) has held as under;

     "The scheme of the Act is clear, and it is that if the Arbitral Tribunal
holds that it has jurisdiction, such an order cannot be said to be illegal or
without jurisdiction at that stage, inasmuch as the competent legislature has
conferred the power on the Arbitral Tribunal "to rule on its own jurisdiction".
Hence, such an order can be challenged only in the manner laid down in sub-
sections (5) and (6) of Section 16, viz., after the arbitration proceedings are
over and the award is made".

   11.5 The Guwahati High Court, in the case of Assam Urban Water Supply &
Sewage Board v. Subhas Project & Marketing Ltd. and Anr.2003 (2) Arb.L.R. 301
(Gau.),(supra) it is held as under;

     "If the Court is allowed to interfere at each and every stage of
arbitration proceedings to examine the correctness of the finding or decision,
it will be a never ending business and it can safely be apprehended that the
arbitration will be a more time consuming process than the Court process as
there will be two forums instead of one".

   The Guwahati High Court has also held that "the Arbitrator has the power to
decide about his own jurisdiction and such decision is not amenable to writ
jurisdiction and the aggrieved party may challenge the same as provided under
Section 16(6) of the Act after the arbitration proceeding is over and the award
is made."

   11.6 In a case where the vires of Arbitration Act of 1996 were challenged on
the ground that order under Section 16(5) of the Act is not subject to judicial
scrutiny, the Hon'ble Supreme Court in the case of Babar Ali v. Union of India -
2000 (2) SCC 178 has held that "There is no question of Arbitration and
Conciliation Act, 1996 being unconstitutional or in any way offending the basic
structure of the Constitution of India". The Hon'ble Supreme Court has held that
only because the question of jurisdiction of the Arbitrator is required to be
considered after the award is passed and not at penultimate stage by the
appropriate court, it cannot be a ground for submitting that such an order is
not subject to any judicial scrutiny. The time and manner of judicial scrutiny
can legitimately be laid down by the Act passed by the Parliament".

   11.7 The Full Bench of this Court in the case of New India Assurance Co. Ltd.
v. Hanjer Fibres Ltd., - AIR 2003 Guj. 311 has held as under;

     "Since the Arbitral Tribunal is competent to rule on its own jurisdiction
including ruling of any objection with regard to existence ro validity of the
arbitration agreement, the order of the Chief Justice with regard to preliminary
objection as to whether dispute is arbitrable or not in view of passing of
receipt of followed final settlement by petitioner company under insurance
policy and direction that the preliminary objection to be decided by the
Arbitral Tribunal under Section 16 without expressing any final opinion on the
said question and leaving it open to the parties to raise that question before
the Arbitrator or Arbitrators could not be said to be vulnerable or in any way
unjust, unreasonable, arbitrary or invalid requiring interference in exercise of
constitutional writ jurisdiction. The parties aggrieved by an arbitral award,
after rejection of such plea of jurisdiction or validity or existence of the
arbitration agreement can challenge the same by invocation of the provisions of
Section 34 of the Act."

   11.8 The Division Bench of this Court in the case of Nirma Ltd. v. Lurgi
Energie Und Entsorgung GMBH, Germany and Ors. reported in AIR 2003 Guj. 145, has
held that "the scheme of Section 16 and 37 is such that the Arbitral Tribunal is
empowered to rule on its own jurisdiction. The plea that the Arbitral Tribunal
does not have jurisdiction or a plea that the Arbitral Tribunal is exceeding the
scope of its authority, has to be decided by the Arbitral Tribunal, if it takes
a decision rejecting that plea, it is duty bound to continue with the arbitral
proceedings and make an arbitral award, and the party aggrieved by such arbitral
award is permitted to make such an application for setting aside the arbitral
award in accordance with Section 34."

   11.9 Now, in backdrop of the above decisions of the Hon'ble Supreme Court as
well as this Court and the other High Courts and considering provisions of the
Arbitration Act 1996 more particularly Section 16 of the Act, it clearly emerges
that once the Arbitral Tribunal in an application under Section 16 of the Act
holds that it has jurisdiction and decides to proceed further with the
arbitration proceedings, then the Arbitral Tribunal is duty bound to continue
with the arbitral proceedings and make an arbitral award. Section 16 of the Act
reads as under;

     16. Competence of arbitral tribunal to rule on its jurisdiction.___

     (1) The arbitral tribunal may rule on its own jurisdiction, including
ruling on any objections with respect to the existence or validity of the
arbitration agreement, and for that purpose,___

     (a) an arbitration clause which forms part of a contract shall be treated
as an agreement independent of the other terms of the contract; and

     (b) a decision by the arbitral tribunal that the contract is null and void
shall not entail ipso jure the invalidity of the arbitration clause.

     (2) A plea that the arbitral tribunal does not have jurisdiction shall be
raised not later than the submission of the statement of defence; however, a
party shall not be precluded from raising such a plea merely because that he has
appointed, or participated in the appointment of, an arbitrator.

     (3) A plea that the arbitral tribunal is exceeding the scope of its
authority shall be raised as soon as the matter alleged to be beyond the scope
of its authority is raised during the arbitral proceedings.

     (4) The arbitral tribunal may, in either of the cases referred to in sub-
section (2) or sub-section (3), admit a later plea if it considers the delay
justified.

     (5) The arbitral tribunal shall decide on a plea referred to in sub-section
(2) or sub-section (3) and, where the arbitral tribunal takes a decision
rejecting the plea, continue with the arbitral proceedings and make an arbitral
award.

     (6) A party aggrieved by such an arbitral award may make an application for
setting aside such an arbitral award in accordance with section 34."

   As per Section 16(5) of the Act, the Arbitral Tribunal shall decide on a plea
referred to in sub-section (2) i.e., a plea that the Arbitral Tribunal does not
have jurisdiction or a plea that the Arbitral Tribunal is exceeding the scope of
its authority and where the Arbitral Tribunal takes a decision rejecting the
plea, the Arbitral Tribunal shall continue with arbitral proceedings and make an
arbitral award.As per sub-section (6) of Section 16, a party aggrieved by such
an arbitral award may make an application for setting aside such an arbitral
award in accordance with Section 34 of the Act. Under the circumstances,
considering the statement and object and in particular sub-section (5) of
Section 16 and sub-section (6) of Section 16 of the Arbitration Act of 1996, the
aforesaid decisions of the Hon'ble Supreme Court and of the other High Courts,
when the Arbitral Tribunal, in the present case, has dismissed the application
submitted by the SCL and Birla VXL with regard to the arbitration and refused to
stay the proceedings and the application under Section 20 with regard to the
venue of the arbitral proceedings, and it has been decided to proceed further
with the arbitration proceedings, the only remedy available to the petitioners
is to wait till the Arbitral Tribunal makes an arbitral award to move an
application for setting aside the same in accordance with Section 34 of the Act.
Under the circumstances, while holding question No. 1 in affirmative to the
effect that against the order passed by the Arbitral Tribunal under Section 16
of the Act, writ petition under Article 226/227 of the Constitution of India is
maintainable, at the same time, considering the scope and ambit of Section 16 of
the Act read with the statement of object of the Arbitration Act, a petition
under Article 226 of the Constitution of India is not required to be
entertained, and the only remedy is to wait till the Arbitral Tribunal makes an
arbitral award and thereafter to make an appropriate application under Section
34 of the Act for setting aside such an arbitral award. Thus, the question No. 2
is answered accordingly.

   12. Now, the third and most important question, which is required to be
decided is, whether in view of the Notification issued under the provisions of
the Bombay Relief Undertakings (Special Provisions) Act, 1958, declaring 'SCL'
as a 'Relief Undertaking', the arbitration proceedings between the SCL and Birla
VXL Ltd, and the arbitration proceedings between SCL and Krupp Industries (I)
Ltd., are required to be stayed ?.

   12.1 However, before answering the said question, the statement and object
and the legislative intent of the BRU Act and the Arbitration Act of 1996 are
required to be considered. The main object of the BRU Act is to make temporary
provision for industrial relations, to conduct or to provide loan, guarantee or
financial assistance for the conduct of certain industrial undertakings and
thereby to prevent unemployment or to provide for unemployment relief. As per
Section 3 of the BRU Act, if at any time it appears to the State Government
necessary to do so, the State Government may by notification in the official
gazette declare that an industrial undertaking specified in the notification,
whether started, acquired or otherwise taken over by the State Government, and
carried on or proposed to be carried on by itself or under its authority, or to
which any loan guarantee or other financial assistance has been provided by the
State Government shall with effect from the dates specified for the purpose in
the notification to serve as a measure of preventing unemployment or of
unemployment relief and the undertaking shall accordingly be deemed to be a
relief undertaking for the purposes of the BRU Act. Section 4 of the BRU is with
regard to consequences of issuance of the notification and declaring an
undertaking as a relief undertaking. The main object and legislative intent of
the Arbitration Act of 1996 is to achieve the sole objective of resolving the
dispute as expeditiously as possible so that trade and commerce are not affected
on account of litigation. The statement of objects and reasons of the Act
clearly envisages that the main intention of the Legislature is to minimise the
supervisory role of the courts in the arbitral process. With this object and
reasons, the Arbitration Act of 1996 was enacted. With this background, let us
proceed to consider the contentions and submissions made on behalf of the
parties.

   12.2 Shri Mihir Thakore, learned Senior Advocate appearing on behalf of SCL,
has vehemently submitted that in view of the Notification issued by the State
Government, declaring the SCL as a 'Relief Undertaking' under the provisions of
the BRU Act, the arbitration proceedings are required to be stayed and by not
staying the arbitration proceedings by the Arbitral Tribunal the Arbitral
Tribunal has committed a grave error. It is also further submitted that Section
4 of the BRU Act suspends any proceeding relating to enforcement of liability
and proceedings before the learned Arbitration could not be carried any further.
It is also further submitted that the object of Section 4(1)(a)(iv) of the BRU
Act is to declare a moratorium on actions against the undertaking during the
period of notification declaring to be a 'relief undertaking' and by such clause
any liability against the relief undertaking is suspended and proceedings which
are already commenced are to be stayed including the proceedings for the
enforcement of an obligation, during the operation of the notification, and
therefore the Arbitral Tribunal has materially erred in holding that only the
proceedings which are in the matter of enforcement of any liabilities against
the relief undertaking are required to be stayed and not the proceedings for
adjudication of liability against the relief undertaking. Relying upon Section 4
of the Act, it is submitted by the learned counsel appearing for the petitioner
SCL that on issuance of a Notification under Section 4 any right, privilege,
obligation or liability accrued or incurred before the undertaking was declared
a Relief Undertaking and any remedy for the enforcement thereof, shall be
suspended and all proceedings relating thereto pending before any Court,
Tribunal, Officer or Authority shall be stayed. It is also further submitted
that thus by virtue of the notification any remedy for the enforcement of any
right shall be suspended and therefore when the arbitration proceeding is
initiated for the enforcement of their right under the agreement, the same is
required to be stayed during the operation of the said notification by which SCL
is declared as a 'Relief Undertaking'.In support of his above submission, Shri
Thakore has relied upon Section 4(a)(iv)(b) of the BRU Act and submitted that
the right, privilege, obligation or liability referred to in clause (a)(iv)
shall on the notification ceasing to have force revive and be enforceable and
the proceedings referred to therein shall be continued provided that in
computing the period of limitation for enforcement of such right the period
during which it was suspended under clause (a)(iv) shall be excluded
notwithstanding anything contained in any law for the time being in force.
Therefore it is submitted that if the time limit for the purpose of filing of
the suit will be over during the operation of the said notification then that
period should be excluded. Therefore it is submitted that the arbitration
proceedings during the operation of the notification which is valid upto 4th
June 2005 at present are required to be stayed. Shri Thakore has further
submitted that Section 4 of the BRU Act is in three parts, the first part is
with regard to suspension of rights, the second part is with regard to
suspension of remedy for enforcement of rights, and the third party is with
regard to staying of proceedings relating to the rights. It is further submitted
that if DLF could not have filed the suit they could not even be permitted to
proceed further with the arbitration proceedings. According to Shri Thakore,
'enforcement of rights' starts with the arbitration proceedings and not with the
execution proceedings. It is further submitted that provision of suit and
arbitration are pari materia and therefore arbitration proceedings have to be
stayed and not the execution proceedings only. Shri Thakore has also further
submitted that Section 22 of the Sick Industrial Undertakings Act is different
from Section 34 of the BRU Act. According to him, under Section 22 of the SICA
Act, there may not be a bar for the arbitration proceedings as only suit is
barred. However, so far as Section 4 of the BRU Act is concerned, enforcement of
right itself is suspended, and, according to him, obtaining an award itself is
enforcement of a right. He has further submitted that if second part of Section
4(iv) applies to arbitration proceedings certainly the third part with regard to
stay will also be made applicable and so the arbitration proceedings are
required to be stayed. Relying upon the Division Bench judgment of this Court in
the case of D.S. Patel & Co. v. The Gujarat State Textile Corporation Limited
And Ors., .reported in 1972 GLR Page 33 = 1971 (41) CC Page 1098, Shri Thakore
has submitted that even winding up proceedings cannot proceed further as the
same are for enforcement of rights. He has relied upon paragraphs 35, 36, 37 and
38 of the said Judgment. Relying upon the judgment of the Rajasthan High Court
in the case of Jaysynth Dyechem etc. etc. v. Mewar Textile Mills Ltd., reported
in AIR 1988 Rajasthan Page 17, it is submitted that winding up proceedings are
also required to be stayed and therefore it is requested to allow the present
Special Civil Application by quashing and setting aside the order passed by the
Arbitral Tribunal rejecting the application submitted by the petitioner SCL
under Section 16 of the Arbitration Act of 1996 by which the petitioner SCL has
prayed to stay the arbitration proceedings during the operation of the
notification issued under the BRU Act.

   12.3 PER CONTRA :- Learned Counsel appearing on behalf of the respondent DLF
has submitted that the present Special Civil Application at this stage is
premature as there is no award declared by the Arbitral Tribunal and only at the
stage of execution of the award Section 4 of the BRU Act will come into play and
at that stage the execution proceedings can be stayed. He has submitted that
what is contemplated under Section 4(a)(iv) of the BRU Act is suspension of any
remedy for enforcement and the proceedings relating thereto are required to be
stayed. According to him, remedy for enforcement would be 'enforcement of any
decree and/or the award. Under the circumstances it is requested to dismiss the
present Special Civil Application. He has further submitted that so far as the
present arbitral proceedings are concerned they are not with regard to recovery
of any dues from the petitioner SCL but it is with regard to damages and what
amount DLF is entitled to by way of damages is yet to be ascertained and
therefore the arbitral proceeding for the purpose of ascertainment of amount
towards damages is not required to be stayed and only after the amount of
damages is determined and the exact amount is ascertained and the award is
declared by the Arbitral Tribunal at the stage of execution of the said award
the proceedings can be stayed. Under the circumstances it is requested to
dismiss the present Special Civil Applications. So far as the reliance placed
upon the judgment of the Rajasthan High Court in the case of M/s. Jaysynth
Dyechem etc. etc. (supra), the learned counsel appearing on behalf of the
respondent DLF has submitted that the wordings in the Rajasthan Act are
different from the words in Section 4 of the BRU Act and therefore the said
judgment is not applicable at all. So far as the reliance placed upon the
judgment of the Division Bench of this Court in the case of D.S. Patel & Co. v.
The Gujarat State Textile Corporation Limited And Ors. (supra), is concerned,
the learned advocate appearing on behalf of the respondent DLF has submitted
that the very Division Bench in Para 38 of the Judgment has held that when the
sub-clause speaks about "suspension" of a right, it only means suspension of tis
execution or enforcement and the incidents of a right except its executability
are therefore not suspended by sub-clause (iv) of Section 4 of the BRU Act.
Therefore, it is submitted that on the contrary the Division Bench Judgment
helps the respondent DLF rather than the petitioners and therefore it is
requested to dismiss the present Special Civil Applications. It is submitted
that the learned Arbitral Tribunal has rightly held that "the right, privilege,
obligation or liability accrued or incurred" can be adjudicated upon and the
question of enforcement would arise only thereafter. Therefore also it is
requested to dismiss the present Special Civil Applications.

   12.4 Sections 3 and 4 of the BRU Act read as under:-

     3. Declaration of relief undertaking.___

     (1) If at any time it appears to the State Government necessary to do so,
the State Government may, by notification in the Official Gazette, declare that
an industrial undertaking specified in the notification, whether started,
acquired or otherwise taken over by the State Government, and carried on or
proposed to be taken over by the State Government, and carried on or proposed to
be carried on by itself or under its authority, [or to which any loan guarantee
or other financial assistance has been provided by the State Government] shall,
with effect from the date specified for the purpose in the notification [be
conducted] to serve as a measure [of preventing unemployment of] of unemployment
relief and the undertaking shall accordingly be deemed to be a relief
undertaking for the purposes of this Act.

     (2) A notification under sub-section (1) shall have effect for such period
not exceeding twelve months as may be specified in the notification; but it
shall be renewable by like notifications from time to time for further periods
not exceeding [twelve months] at a time, so however that all the periods in the
aggregate do not exceed [ten years]."

     4. Power to prescribe industrial relations and other facilities temporarily
for relief undertakings___(1) Notwithstanding any law, usage, custom, contract,
instrument, decree, order, award, submission, settlement, order or other
provision whatsoever,the State Government may, by notification in the Official
Gazette, direct that___

     (a) in relation to any relief undertaking and in respect of the period for
which the relief undertaking continues as such under sub-section (2) of section
3__

     (i) all or any of the laws in the Schedule to this Act or any provisions
thereof shall not apply (and such relief undertaking shall be except therefrom),
or shall, if so directed by the State Government, be applied with such
modifications (which do not however affect the policy the said laws) as may be
specified in the notification;

     (ii) all or any of the agreements, settlements, awards or standing orders
made under any of the laws in the Schedule to this Act, which may be applicable
to the undertaking immediately before it was acquired or taken over by the State
Government [or before any loan, guarantee or other financial assistance was
provided to it by, or with the approval of the State Government] for being run
as a relief undertaking, shall be suspended in operation, or shall, kif so
directed by the State Government, be applied with such modifications as may be
specified in the notification;

     (iii) rights, privileges, obligations and liabilities shall be determined
and be enforceable in accordance with clauses (i) and (ii) and the notification;

     (iv) any right, privilege, obligation or liability accrued or incurred
before the undertaking was declared a relief undertaking and any remedy for the
enforcement, thereof shall be suspended and all proceedings relative thereto
pending before any court, Tribunal, officer or authority shall be stayed;

     (b) the right, privilege, obligation or liability referred to in clause
(a)(iv) shall, on the notification ceasing to have force, revive and be
enforceable and the proceedings referred to therein shall be continued :

     Provided that in computing the period of limitation for the enforcement of
such right, privilege, obligation or liability, the period during which it was
suspended under clause (a)(iv) shall be excluded notwithstanding anything
contained in any law for the time being in force.

     (2) A notification under sub-section (1) shall have effect from such date,
not being earlier than the date referred to in sub-section 3, as may be
specified therein and the provisions of section 21 of the Bombay General Clauses
Act, 1904 (Bom. I of 1904), shall apply to the power to issue such
notification."

   There is a notification in favour of the petitioner SCL issued under the
provisions of the BRU Act declaring SCL as a Relief Undertaking. It is the
contention on behalf of the petitioners that by virtue of the notification
issued under Section 4 of the Act declaring the SCL as a 'Relief Undertaking',
any remedy for enforcement of any right is required to be stayed meaning thereby
the arbitration proceeding which is for enforcement of the right under the
agreement is required to be stayed. Now, let us see what is the meaning of word
"Enforcement". Lord Denim in Overseas Engineering (Gb) Ltd., reported in (1962),
3 All England Reports, Page 12, as attributed meaning to word "execution" as the
process for enforcing or giving effect to Judgment of the Court. So, any remedy
for the enforcement of any right is to be construed as 'enforcement' of right to
execute a decree/award. In the present case, the arbitration proceedings are for
ascertainment of the amount which is required to be paid and/or the respondent
DLF is entitled to if any and the adjudication has yet to take place. Only after
adjudication and ascertainment of particular amount, if any, the question of
enforcement of that right to recover the amount under the award may arise, i.e.,
at the time of initiating the execution proceedings under Section 36 of the
Arbitration Act of 1996. Now, the main object of the BRU Act is to prevent
unemployment and to make temporary provision for industrial relations, to
conduct or to provide loan, guarantee, or financial assistance for the conduct
of certain industrial undertakings and thereby to prevent unemployment. By
proceeding further with the arbitration proceedings and adjudicating the claim
only and to allow for ascertaining the amount which the respondent DLF is
entitled to, if any, the industrial undertaking is not likely to be closed
and/or the same will not render unemployment. Even the Division Bench of this
Court, in the case of D.S. Patel & Co. v. The Gujarat State Textile Corporation
Limited and Ors.(supra), in which vires of Section 4 of the BRU Act was
challenged, in Para 38, while upholding the vires of Section 4 has held, that
the Legislature has advisedly used the word "suspended" and "stayed" in sub-
clause (iv) with reference to rights, remedies and proceedings. "Suspension" is
not tantamount to "destruction" or annihilation". Therefore, when the sub-clause
speak about "suspension" of a right, it only means suspension of its execution
or enforcement. The incidents of a right, excepts its executability, are
therefore, not suspended by the sub-clause." Under the circumstances, what is
required to be stayed is the "execution" and Section 4 of the BRU Act will come
into play when the award is to be executed.

   13. If statement and object of the Arbitration Act of 1996 and the BRU Act
are read conjointly, it will appear that the main statement and object of the
Arbitration Act of 1996 is enacted for speedy resolution of disputes without
intervention of the Courts. If the arbitration proceedings for ascertainment of
the amount and the adjudication itself is stayed during the operation of the
notification under Section 4 of the Act, in that case the same will be contrary
to the statement and object and the legislative intent of enacting the
Arbitration Act of 1996. On the other hand, if the adjudication is permitted to
go on in an arbitration proceeding and the meaning of the words "remedy for
enforcement of right" is given to the extent that the proceedings at the time of
execution of the award, if any, is required to be stayed if the Notification
under Section 4 of the Act is in operation, then in that case it is not likely
to affect the undertaking which is declared as a 'Relief Undertaking' under the
BRU Act as no prejudice will be caused to the such Undertaking, meaning thereby
by allowing the arbitration proceedings to go on and adjudication and
ascertainment of amount, if any, is permitted, it is not likely to render any
unemployment and/or closure of the undertaking.Under the circumstances, the
learned Arbitral Tribunal has rightly held that the provisions of Section 4 of
the BRU Act only helps the concerned Undertaking with reference to enforcement
of liability and "right", privilege, obligation or liability, accrued or
incurred can be adjudicated upon and the question of enforcement would arise
only thereafter and the object of statute on a proper construction is that in
respect of an Undertaking if those things are established the enforcement shall
remain suspended. It is also further rightly held by the Arbitral Tribunal that
after adjudication the SCL may succeed on merits and the claims may be rejected
and in that event there will be no need for the SCL to project the notification
in defence, and if the claim may be partly allowed and in the event of
enforcement and if at that time the notification continues to be in force, the
SCL may avail the benefit and the Court concerned with the execution of
enforcement may consider this aspect.

   14. Some what identical question came to be considered by the Hon'ble Supreme
Court in the case of Eagle Flask Industries Ltd. v. Talegaon Dabhade Municipal
Council and Ors., reported in (2004) 8 SCC 640. While dealing with Section 22 of
Sick Industrial Companies (Special Provisions) Act, 1985 in a case where the
company was before BIFR and the Municipal Corporation was trying to recover the
octroi and the assessment was being done by the Corporation and an objection was
raised by the company before the BIFR that the municipal authority cannot levy
the octroi and/or no recovery in respect of the amount concerned can be
directed, the Hon'ble Supreme Court has held, "that the effect of Section 22 is
to be considered only when there is a demand for recovery and the question of
recovery would arise only when there is a quantified demand on assessment and
admittedly that stage has not reached," and ultimately the Hon'ble Supreme Court
has held that "it is open to the Municipal Council to make an assessment and
quantification of the octroi duty payable, if not already done and only after
the quantification is done and the assessment made as provided in law, the
question of recovery would arise and at that stage the effect of Section 22 can
be considered." Applying the same analogy to the present proceedings and Section
4 of the BRU Act, the arbitration proceeding for the adjudication and
ascertainment of any amount may go on but the effect of Section 4 can be
considered at the time of execution of the award which may be declared by the
Arbitral Tribunal, and if such an interpretation would be there it will be in
consonance with the provisions of the BRU Act as well as the Arbitration Act of
1996. Under the circumstances, the request on the part of the petitioner SCL to
stay the arbitration proceedings before the Arbitral Tribunal during the
operation of the notification under Section 4 of the BRU Act cannot be accepted
and the same is rightly rejected by the Arbitral Tribunal in an application
under Section 16 of the Act.

   15. Conclusions:-

     (1) Against the order passed by the Arbitral Tribunal under the provisions
of the Arbitration Act of 1996 the petition under Articles 226 and 227 of the
Constitution is maintainable;

     (2) However, considering the statement and object of the Arbitration Act of
1996 and Section 16 of the Arbitration Act of 1996 when the Arbitral Tribunal
has decided about its own jurisdiction in an application under Section 16 of the
Act, in that case the Arbitral Tribunal has to proceed further with the arbitral
proceedings and to declare the award which can be challenged only at the stage
of Section 34 of the Arbitration Act of 1996, and therefore the petition under
Article 226 of the Constitution of India against the order passed by the
Arbitral Tribunal under Section 16 of the Act is not required to be entertained
and the party has to wait upto conclusion of proceedings under Section 34 of the
Arbitration Act;

     (3) Considering the statement and object of the BRU Act as well as Section
16 of the Arbitration Act of 1996 read with Section 4 of the BRU Act, an
proceeding for ascertainment of any amount and/or adjudication between the
parties may go on and the effect of Section 4, i.e., with regard to suspension
of proceedings is required to be considered at the stage of execution of the
award, if any, and the arbitration proceedings, during the operation of the BRU
Notification may go on till the actual stage of execution of the award, if any.

   16. For the reasons stated hereinabove, all the three Special Civil
Applications are required to be rejected and are accordingly dismissed. Rule, in
each of the matter, stands discharged. Ad-interim relief, if any, shall stand
vacated forthwith. There will be no order as to costs. However, it is ordered
that the arbitration proceedings, from the stage of execution, should not be
proceeded further during the operation of the notification under the Bombay
Relief Undertakings (Special Provisions) Act, 1958. If the petitioners are
aggrieved by Arbitral Award, they may make application for setting aside such
arbitral award in accordance with Section 34 of the Act and the plea to
suspend/stay the proceedings can be considered at the time of execution of the
Award.

   At this stage, the learned advocate, Mr. Singhi, appearing for the
petitioners, requests to stay the judgment of this Court. Considering the facts
and circumstances of the case, operation and implementation of this Judgment and
Order shall remain stayed upto 17th June 2005 in case if the Notification under
the BRU Act is extended, otherwise this Judgment shall remain stayed till 4th
June 2005 only.