General Manager East Coast Railway Rail Sadan & Anr. Versus Hindustan Construction Co. Ltd.

General Manager East Coast  Railway Rail Sadan & Anr. Versus Hindustan Construction Co. Ltd.

Landmark Cases of India / सुप्रीम कोर्ट के ऐतिहासिक फैसले


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REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 4747 of 2022
General Manager East Coast 
Railway Rail Sadan & Anr.      …Appellants
Versus
Hindustan Construction Co. Ltd.             …Respondent
J U D G M E N T
M.R. SHAH, J.
1. Feeling   aggrieved   and   dissatisfied   with   the   impugned
judgment   and   order   passed   by   the   High   Court   of   Orissa   at
Cuttack in Arbitration Petition No.10 of 2021 by which the High
Court   in   exercise   of   powers   under   Section   11(6)   of   the
Arbitration and Conciliation Act, 1996 (hereinafter referred to as
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‘the Act’) has appointed an Arbitrator to adjudicate the dispute
between the parties, the original informant – General Manager,
East Coast Railway Rail Sadan and Anr., have preferred the
present appeal.
2. As such the dispute in the present appeal is in a very
narrow compass.
3. The   dispute   arose   between   the   appellant   and   the
respondent   with   respect   to   the   contract/agreement   dated
29.11.2018.     That the respondent herein ­ original claimant
initiated the proceedings under Section 9 of the Arbitration Act
before   the   learned   Additional   District   Judge,   Visakhapatnam
seeking   interim   injunction   against   the   encashment   of
Performance Bank Guarantee and forfeiture of security deposit.
The   said   application   came   to   be   allowed   by   the   learned
Additional   District   Judge   vide   order   dated   06.11.2019
restraining the appellants herein from forfeiting security deposit
for period of six months except on the special circumstances.
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4. That thereafter the respondent vide letter dated 01.12.2019
requested   the   appellant   to   constitute   the   Arbitral   Tribunal
raising five claims.  It appears that in terms of the Arbitration
Agreement,   arbitration   proceedings   were   initiated   by   the
appellants by appointing an arbitrator to adjudicate the dispute
between the parties.  That the Arbitrator issued notices calling
upon   the   parties   to   submit   their   respective   claims.     The
respondent herein sought time vide letter dated 02.04.2020 for
filing the claim in view of Covid­19 Pandemic.   The Arbitrator
adjourned the proceedings to 03.04.2020.  Instead of submitting
the   claim,   vide   letter   dated   01.09.2020   the   respondent
questioned   the   validity   of   arbitral   tribunal.     Thereafter   the
respondent filed the Arbitration Petition No.10 of 2021 before the
High Court of Orissa at Cuttack under Section 11(6) of the Act
seeking appointment of an Arbitrator.  The said application was
opposed   by   the   appellants   relying   upon   Section   42   of   the
Arbitration Act and it was the case on behalf of the appellants
that in view of Section 42 of the Arbitration Act, the application
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under Section 11(6) of the Act shall lie before the High Court of
Andhra Pradesh at Amaravati as the respondent itself earlier
filed Section 9 application before the Court at Vishakhapatnam.
It was also submitted on behalf of the appellants that procedure
dated 16.11.2016 upon which reliance has been placed by the
respondent was superseded by GCC issued by Railway Board in
November, 2018.   Despite the above jurisdictional issue raised
and without addressing on the jurisdiction of the Orissa High
Court, by the impugned judgment and order the High Court of
Orissa   at   Cuttack   has   appointed   the   Arbitrator   solely   by
observing   that   since   the   appellant,   East   Coast   Railways   in
principle, is not opposing the appointment of an Arbitrator there
is little purpose served in relegating the respondent (original
petitioner) to the appropriate High Court as that will only delay
the adjudication of the disputes.
5. Feeling   aggrieved   and   dissatisfied   with   the   impugned
judgment   and   order   passed   by   the   High   Court   of   Orissa   at
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Cuttack, the original respondent – General Manager – East Coast
Railway has preferred the present appeal.
6. We have heard Shri K.M. Natraj, learned ASG appearing on
behalf of the appellants and Shri Amit Dubey, learned Counsel
appearing on behalf of the respondent.  We have gone through
the impugned judgment and order passed by the High Court.  A
specific objection was raised by the appellant herein before the
High Court on the entertainability and/or maintainability of the
application under Section 11(6) of the Arbitration Act before the
Orissa High Court.   Reliance was placed on Section 42 of the
Arbitration Act and it was submitted on behalf of the appellants
that   as   the   respondent   ­   claimant   had   initiated   proceedings
under   Section   9   of   the   Arbitration   Act   in   the   Court   at
Vishakhapatnam, only the High Court of Andhra Pradesh at
Amaravati would have jurisdiction to entertain the application
under Section 11(6) of the Act.  Without deciding the said issue
which goes to the root of the jurisdiction of the High Court of
Orissa at Cuttack, the said High Court by the impugned order
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has entertained the application under Section 11(6) of the Act
and has appointed the sole arbitrator by observing that since the
appellants – East Coast Railway, in principle, has not opposed
the appointment of an arbitrator, there is little purpose served in
relegating the original petitioner to the concerned High Court as
that   will   only   delay   the   adjudication   of   the   disputes.     The
appellants   might   not   have   opposed   the   appointment   of   an
arbitrator (though the fresh appointment of an Arbitrator was
also opposed by the appellants herein) by that itself it will not
confer the jurisdiction upon the High Court if otherwise, the
High Court had no jurisdiction.
7. Heavy   reliance   is/was   placed   on   Section   42   of   the
Arbitration and Conciliation Act, 1996 which reads as under:
“42.   Jurisdiction.   ­   Notwithstanding   anything
contained elsewhere in this Part or in any other
law for the time being in force, where with respect
to an arbitration agreement any application under
this Part has been made in a Court, that Court
alone   shall   have   jurisdiction   over   the   arbitral
proceedings   and   all   subsequent   applications
arising   out   of   that,   agreement   and   the   arbitral
proceeding shall be made in that Court and in no
other Court.”
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7.1 It is not in dispute that before filing an application under
Section   11(6)   of   the   Act   before   the   High   Court   of   Orissa   at
Cuttack, the respondent – claimant moved an application before
the Court at Visakhapatnam under Section 9 of the Arbitration
Act.   In that view of the matter considering Section 42 of the
Arbitration Act, the High Court of Andhra Pradesh at Hyderabad
alone   would   have   jurisdiction   to   decide   the   subsequent
applications   arising   out   of   the   Contract   Agreement   and   the
further arbitral proceedings shall have to be made in the High
court of Andhra Pradesh at Amaravati alone and in no other
court.   In that view of the matter the High Court of Orissa at
Cuttack   has   committed   a   serious   error   in   entertaining   the
application   under   Section   11(6)   of   the   Act   before   it   and
appointing the sole arbitrator.
8. In view of the above and for the reason stated above, the
present Appeal Succeeds.   The impugned judgment and order
passed by the High Court of Orissa at Cuttack in Arbitration
Petition   No.10   of  2021   and   appointing  the   sole   arbitrator   is
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hereby quashed and set aside solely on the ground that the High
Court   of   Orissa   at   Cuttack   would   have   no   jurisdiction   to
entertain the application under Section 11(6) of the Act with
respect   to   the   contract   agreement   for   which   the   respondent
claimant   earlier   initiated   the   arbitration   proceedings   under
Section 9 of the Arbitration Act in the Court at Vishakhapatnam.
Present Appeal is accordingly Allowed.  However, it is observed
that it will be open for the respondent claimant to submit/move
an   application   under   Section   11(6)   of   the   Act   before   the
competent High Court having jurisdiction namely the High Court
of Andhra Pradesh at Amaravati and if such an application is
made before the High Court of Andhra Pradesh at Amaravati
within a period of four weeks from today, the same be dealt with
and considered in accordance with law and on its own merits at
the earliest.
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The   Present   Appeal   is   Allowed   to   the   aforesaid   extent.
However, in the facts and circumstances of the case, there shall
be no order as to costs.
…………………………………J.
                (M. R. SHAH)
…………………………………J.
                                                     (B. V. NAGARATHNA)
New Delhi, 
July 22, 2022

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