H.P. Mahila Vikas Nigam vs Jerath Electronics and Allied Industries

Deepak Gupta, J.—This appeal is directed against the judgment dated Ist May, 2007 delivered by a learned Single Judge of this Court whereby he upheld the award of the Arbitrator and dismissed the objections filed by the present Appellant against the award dated 17.3.2005 given by the Financial Commissioner-cum-Secretary (Revenue & Appeals) who had been appointed as Arbitrator by the nominee Judge of the Chief Justice of the High Court of Himachal Pradesh.

Briefly stated the facts of the case are that the Appellant H.P. Mahila Vikas Nigam is a body corporate and had framed bye-laws called the "Himachal Pradesh Mahila Vikas Nigam Bye-Laws for Financial Assistance, 1989". Clause 5(b) of these bye-laws provided that the Nigam would grant 4% relief on total investment made by a Unit on a Project, by way of subsidy, if in a particular financial year the Unit provided employment to women to the extent of at least 60% of the work force of that Unit. Another rider was that the number of total employees should not be less than six. Clause 17 of these bye-laws provided that in case of any dispute arisen out of or in any way touching or concerning the bye-laws, the matter would be referred to the sole Arbitration of the Secretary (Welfare) to the Government of Himachal Pradesh or his nominee acting as such at that time.

The Respondent M/s. Jerath Electronics and Allied Industries (hereinafter referred to as the Unit) set up a Unit some time in the year 1990. According to the Unit they had employed more than 60% women in their work force during the years 1990-91 and 1991-92 and therefore laid claim for subsidy @ 4% p.a. for the aforesaid two years on the total investment made by it. The claim remained pending for a long time and ultimately it was rejected on 11.9.1998 by the Financial Commissioner-cum-Secretary (Welfare) to the Government of Himachal Pradesh.

Thereafter, the Unit made an application to the Chief Justice of the High Court of Himachal Pradesh u/s 11(6) of the Arbitration and Conciliation Act for appointment of an Arbitrator. According to the Unit the Arbitrator named in the agreement could not act as Arbitrator since he had rejected the claim of the Unit exercising his administrative powers. The Mahila Nigam raised objections before the nominee Judge and submitted that there was no arbitration agreement between the parties and there was no dispute which could be referred. It was also alleged that the claim was barred by limitation. Another ground taken was that Clause 5(b) of the bye-laws had been repealed in the year 1992 and that the claim was not legally maintainable.

Objections filed by the Nigam were rejected and the nominee Judge held that the Nigam had given an offer to anybody setting up a Unit and employing more than 60% women in its work force to provide subsidy equal to 4% of the total investment. The nominee Judge held that a dispute which was referable to arbitration existed and the same was referred for adjudication by way of arbitration to the Financial Commissioner-cum-Secretary (Revenue and appeals) Himachal Pradesh. The question of limitation was left open to be decided by the Arbitrator.

The Unit filed its claim and the Nigam opposed the same on various grounds. The Arbitrator vide his award held that the Unit was entitled to subsidy @ 4% p.a. for the years 1990-91 and 1991-92 since it had employed more than 60% women and the number of employees were more than six. He passed an award of Rs. 6,77,656/- in favour of the Unit and against the Nigam.

The Nigam filed objections and again a question was raised that there was no agreement within the meaning of Section 7 of the Arbitration and Conciliation Act and that the claim was barred by limitation. Further according to the Nigam since Clause 5(b) stood repealed no amount could have been awarded. The learned single Judge rejected both the objections. Hence, the present appeal by the Nigam alone. The Unit has not filed any appeal.

The first question which arises is whether the question which have been determined by the nominee Judges can be re-agitated in objections filed u/s 34. Sh. G.D. Verma, learned senior Counsel has again stressed that there was no arbitration agreement between the parties within the meaning of Section 7 of the Arbitration and Conciliation Act and hence Arbitrator could not have been appointed. He submits that if the nominee Judge appoints an Arbitrator, objections can be raised only u/s 34. This contention of Sh. G.D. Verma cannot be accepted in view of the law laid down by the Apex Court in SBP and Co. v. Patel Engineering Ltd. and Anr. (2005) 8 SCC 618, wherein the Apex Court held that an order passed u/s 11(6) of the Arbitration and Conciliation Act, 1996 is a judicial order and an appeal against the said order would lie to the Apex Court. It has also clearly been held that the Chief Justice or the nominee Judge has the jurisdiction to determine the question whether the arbitration agreement exists or not and whether there is a dispute referable to arbitration. It would be apposite to make reference to the following observations of the Apex Court:

We, therefore, sum up our conclusions as follows:

(i) The power exercised by the Chief Justice of the High Court or the Chief Justice of India u/s 11(6) of the Act is not an administrative power. It is a judicial power.

(ii) xxxxx

(iii) xxxxx

(iv) The Chief Justice or the designated judge will have the right to decide the preliminary aspects as indicated in the earlier part of this judgment. These will be, his own jurisdiction, to entertain the request, the existence of a valid arbitration agreement, the existence or otherwise of a live claim, the existence of the condition for the exercise of his power and on the qualifications of the arbitrator or arbitrators. The Chief Justice or the judge designated would be entitled to seek the opinion of an institution in the matter of nominating an arbitrator qualified in terms of Section 11(8) of the Act if the need arises but the order appointing the arbitrator could only be that of the Chief Justice or the designated Judge.

(v) xxxxxxx

(vi) xxxxxx

(vii) Since an order passed by the Chief Justice of the High Court or by the designated judge of that court is a judicial order, an appeal will lie against that order only under Article 136 of the Constitution of India to the Supreme Court.

In view of the aforesaid judgment of the Apex Court the contention of Sh. G.D. Verma that these objections can be raised in these proceedings cannot be accepted.

The next submission made by Sh. G.D. Verma is that the claim filed before the Arbitrator was time barred. The answer to this is simple. For the first time the claim of the Petitioner was rejected by the Nigam only in September, 1998 and an application for appointment of Arbitrator was filed in the High Court in August, 2000 and immediately after the Arbitrator was appointed and the claim petition was filed. The Arbitrator as well as the learned Single Judge have held that the claim was within time and we see no ground to reject the claim on the ground of limitation.

It would be pertinent to mention that now it is urged that the order of the Secretary (Welfare) has nothing to do with the affairs of the Nigam and cannot be raised at the starting point of limitation.

As held by the learned single Judge the Appellant cannot be permitted to raise such a contention since this contention was not raised before the Arbitrator. In fact in the reply filed before the Arbitrator it was categorically stated that the claim of the claimant had been rejected on 11.9.1998 by the Secretary (Welfare).

The last contention is that Clause 5 of the bye-laws stands repealed and therefore the Unit is not entitled to claim any benefit under this clause. Clause 5(b) was repealed only in the year 1992 and prior to that the claim of the claimant was maintainable.

It would be pertinent to mention that Sh. G.D. Verma has cited certain judgments but we find that some of them are totally irrelevant. However, to keep the record straight we may refer to them.

The judgment in Urban Improvement Trust, Jodhpur Vs. Gokul Narain and another, has no relevance to the present case.

The judgment of the Apex Court in Bihar State Mineral Dev. Corpn. and Another Vs. Encon Builders (I) Pvt. Ltd., also has no relevance since the question whether an arbitration agreement existed or not was a question which has already been decided by a nominee Judge which judgment has become final.

Similarly the judgments in Travancore Devaswom Board v. Panchamy Pack (P) Ltd. (2004) 13 SCC 510 , Dresser Rand S.A. Vs. BINDAL Agro Chem Ltd. and K.G. Khosla Compressors Ltd., , Groupe Chimique Tunisien SA Vs. Southern Petrochemicals Industries Corpn. Ltd., and National Highways Authority of India and Another Vs. Bumihiway DDB Ltd. (JV) and Others, do not apply to the facts of the present case.

In view of the above discussion, we find no merit in the appeal which is accordingly dismissed. No order as to costs.