Case Note & Summary
The dispute arose from a construction contract for the Upper Kolab Multi Purpose River Project in Orissa. Tenders were invited on 16.7.1979, the appellant's tender was accepted, and an agreement was executed for construction of a concrete cum-masonry dam. The work order was issued on 2.1.1981 with completion due by 30.9.1982, later extended to end of December 1985. Escalation charges were paid only up to 31.3.1985, and other amounts including security deposit refunds remained unpaid, leading to a reference to the Arbitration Tribunal constituted under Section 41A of the Arbitration Act, 1940 as amended by the Arbitration (Orissa Amendment) Act, 1982. A counterclaim was filed by the State. The Arbitration Tribunal directed the State Government to refer the dispute to a Special Tribunal because the claim exceeded rupees one crore, as required by the proviso to Section 41A(1). By notification dated 6.5.1988, the State Government constituted a Special Tribunal comprising a retired High Court Judge and referred the dispute. The Special Tribunal held its first sitting on 28.5.1988, and no party challenged its jurisdiction. Time for making the award was extended by consent through joint memoranda filed on 28.8.1988 and 18.1.1989. The award was made and signed on 10.2.1989. The State filed objections, but the Subordinate Judge rejected them on 26.9.1989 and made the award rule of the court with 6% pendente lite and 4% future interest. The State appealed to the High Court, which set aside the award on three grounds: lack of jurisdiction of the Special Tribunal, lack of power to extend time, and non-consideration of relevant materials. The High Court remitted the matter to the Arbitration Tribunal for fresh adjudication. The appellant then appealed to the Supreme Court. The Supreme Court held that the notification dated 6.5.1988 was issued under the proviso to Section 41A(1) and not under subsection (7), and that the State had submitted to the Special Tribunal's jurisdiction and could not later challenge it merely because the award was adverse. The Court observed that the State could not be permitted to behave like an ordinary dishonest litigant. It set aside the High Court's finding on jurisdiction. On the issue of extension of time, the Court noted that both parties had consented to the extensions through joint memoranda, and thus the extension was valid. The Supreme Court allowed the appeal, set aside the High Court's judgment, and restored the Special Tribunal's award as made rule of the court by the Subordinate Judge.
Headnote
A) Arbitration Law - Jurisdiction of Special Arbitration Tribunal - State Estopped from Challenging Jurisdiction - Arbitration Act, 1940, Section 41A(1) proviso - The State Government referred a dispute involving a claim exceeding rupees one crore to a Special Tribunal under the proviso to sub-section (1) of Section 41A after the Arbitration Tribunal directed such reference; the State participated in proceedings without objection. The High Court allowed the State to challenge the Special Tribunal's jurisdiction after the award. The Supreme Court held that the State could not be permitted to take such a stand merely because the award was adverse, describing such conduct as that of an ordinary dishonest litigant; the High Court's finding on jurisdiction was set aside. (Paras 6-7)
B) Arbitration Law - Extension of Time for Making Award - Consent of Parties - Arbitration Act, 1940 - Both parties filed joint memoranda on 28.8.1988 and 18.1.1989 consenting to extension of time for the Special Tribunal to make its award. The Special Tribunal passed orders extending time accordingly. The Supreme Court examined these consent orders and held that extension of time by consent of parties was valid and did not vitiate the award. (Paras 8)
Issue of Consideration
Whether the State Government could challenge the jurisdiction of the Special Tribunal after having constituted it and referred the dispute; whether the Special Tribunal had jurisdiction to enlarge the time for making the award; whether the award was invalid due to non-consideration of relevant materials
Final Decision
The Supreme Court allowed the appeal, set aside the High Court's judgment, and restored the Special Tribunal's award as made rule of the court by the Subordinate Judge, holding that the State was estopped from challenging jurisdiction and that consent extensions of time were valid.
Law Points
- State Government cannot challenge jurisdiction of Special Tribunal after participating and referring dispute
- Reference under proviso to Section 41A(1) is valid for claims exceeding one crore
- Consent of parties extends time for making award
- High Court should not permit State to take inconsistent stand after adverse award
- Arbitration proceedings favour party autonomy and finality
Case Details
1995 LawText (SC) (03) 17
Singh N.P. (J), Ahmadi A.M. (CJ), Manohar Sujata V. (J)
1995 AIR 2189, 1995 SCC (3) 8, JT 1995 (2) 561, 1995 SCALE (2) 105
The Hindustan Corporation Co. Ltd.
Governor of Orissa & Ors.
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Nature of Litigation
Appeal against High Court order setting aside arbitration award and remitting dispute to Arbitration Tribunal for fresh adjudication.
Remedy Sought
Appellant sought restoration of the Special Arbitration Tribunal's award and setting aside of the High Court's order.
Filing Reason
High Court set aside award on grounds of jurisdiction, extension of time, and non-consideration of materials.
Previous Decisions
Special Arbitration Tribunal made and signed award on 10.2.1989; Subordinate Judge rejected objection and made award rule of court on 26.9.1989; High Court allowed State's appeal and set aside award with direction to Arbitration Tribunal to adjudicate afresh.
Issues
Whether the State Government could challenge the jurisdiction of the Special Tribunal after having constituted it and referred the dispute.
Whether the Special Tribunal had jurisdiction to enlarge the time for making the award.
Whether the award was invalid due to non-consideration of relevant materials.
Submissions/Arguments
Appellant contended that the Notification dated 6.5.1988 was issued under the proviso to Section 41A(1) and not under sub-section (7), and that the State Government had submitted to the Special Tribunal's jurisdiction, so it could not later challenge it.
Respondent-State contended before the High Court that the constitution of the Special Tribunal and reference under Section 41A was without jurisdiction, that the Special Tribunal lacked power to extend time, and that the award was invalid due to non-consideration of relevant materials.
Ratio Decidendi
A party who has submitted to the jurisdiction of a tribunal and participated in the proceedings cannot later challenge that jurisdiction merely because the award is adverse. The State Government cannot be permitted to behave like an ordinary dishonest litigant by taking a chance and then questioning jurisdiction after an unfavorable outcome. Reference to a Special Tribunal under the proviso to Section 41A(1) of the Arbitration Act, 1940 is valid for claims exceeding rupees one crore. Extension of time for making an award by consent of both parties is valid and does not vitiate the award.
Judgment Excerpts
The State Government cannot be permitted to behave like an ordinary dishonest litigant who takes an off chance hoping to succeed and if the outcome is not to his liking to turn back and question the Special Tribunal's jurisdiction.
According to us, in the facts and circumstances of the case, the High Court ought not to have permitted the State Government to raise such a contention after it had submitted to the jurisdiction of the Special Tribunal merely because the award went against it.
Time is enlarged as submitted by learned counsel for both the sides.
In the Notification dated 6.5.1988, it has been clearly stated that a dispute had arisen between the appellant and the State Government involving rupees more than one crore and the Arbitration Tribunal has also given a direction to appoint Special Tribunal.
Procedural History
Tenders were invited on 16.7.1979 for the Upper Kolab Multi Purpose River Project. The appellant's tender was accepted and an agreement executed. Work order was issued on 2.1.1981 with completion due by 30.9.1982, later extended to December 1985. Due to non-payment of escalation charges after 31.3.1985 and other dues, the dispute was referred to the Arbitration Tribunal under Section 41A of the Arbitration Act, 1940 as amended by the Arbitration (Orissa Amendment) Act, 1982. A counterclaim was filed by the State. The Arbitration Tribunal directed the State Government to refer the dispute to a Special Tribunal because the claim exceeded rupees one crore. By notification dated 6.5.1988, the State Government constituted the Special Tribunal and referred the dispute. The Special Tribunal held its first sitting on 28.5.1988. No party challenged jurisdiction. Time for award was extended by consent through joint memoranda on 28.8.1988 and 18.1.1989. The award was made on 10.2.1989. The State filed objections; the Subordinate Judge rejected them on 26.9.1989 and made the award rule of the court with interest. The State appealed to the High Court, which allowed the appeal and set aside the award, remitting the matter to the Arbitration Tribunal. The appellant then appealed to the Supreme Court, which granted leave and ultimately allowed the appeal, restoring the award.
Acts & Sections
- Arbitration Act, 1940: Section 41A, Section 47
- Arbitration (Orissa Amendment) Act, 1982: Section 41A
- Arbitration (Orissa Amendment) Act, 1984:
