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13 February 2020

Statutory Arbitral Tribunals have power to grant interim injunction u/s. 17 of Arbitration and Conciliation Act

Key Points:

Part I of the Arbitration and Conciliation Act, 1996 shall apply to all arbitrations, even carried out under another enactment, as long as the same is not inconsistent with such enactment or rules made thereunder.

 

Facts:

The Gujarat Public Works Contracts Disputes Arbitration Tribunal Act, 1992 (“Gujarat Act”) was enacted with a view to compulsorily refer all disputes arising out of “works contract” entered into by the State Government or the Public Sector Undertakings with any other person for those works defined as “works contract” in terms of Section 2(k) of the Gujarat Act to an arbitral tribunal constituted under the said enactment.

Disputes arose between an Appellant herein and the State and the State in order to recover certain due amounts had laid threats to withhold payments payable to the contractor under other contracts executed between both parties.

By relying on the judgment of the Apex Court in State of Karnataka v. Shree Rameshwara Rice Mills, Thirthahalli, (1987) 2 SCC 160, the High Court of Gujarat had concluded that without quantification or crystallization of the amount sought to be recovered, the employer or the contractor cannot unilaterally recover the said amounts from the ongoing contract work of the same contractor in connection with another contract. The said judgment of the Hon’ble High Court has been appealed herein by way of the present Civil Appeal.

Counsel for the State has contended that the High Court has no jurisdiction to pass such an order and that the only remedy, if any, is to approach the arbitral tribunal, constituted under the Gujarat Act. However, the counsel for the Appellant has contended that, vide an order dated 24.11.2005, the arbitral tribunal had determined that the arbitral tribunal had no jurisdiction to grant any relief, whether by way of injunction or otherwise, and that the order of an interim injunction definitely did not fall under the ambit of an ‘interim award’ as defined under the said Gujarat Act.

 

Observations by the Court:

Whether the Gujarat Public Works Contract Disputes Arbitration Tribunal constituted under Section 3 of the Gujarat Act has jurisdiction to make interim orders in terms of Section 17 of the Arbitration and Conciliation Act, 1996.

Held: Yes. Part I of the Arbitration Act i.e. from Section 2 to Section 43 deals with Arbitration and Section 2(2) clearly states that the said Part would apply to all Arbitrations which take place in India. Section 2(4) makes it absolutely clear that other than Section 40(1), 41 and 43, Part I of the A&C Act shall apply to all arbitrations even if they are carried out under any other enactment as if the arbitrations were pursuant to an arbitration agreement except insofar as the provisions of Part I are inconsistent with the other enactment or any rules made thereunder. Even statutory arbitrations under other enactments would be governed by Part I. The only exception is that if there is any departure from Part I in the special enactment then the special enactment will prevail and the Arbitration Act will give way to the special enactment. Further, as long as the enactment thereof recognizes the powers of the statutory tribunal to pass interim awards, the powers to grant interim injunction are read into the same. It is relevant to note that the Gujarat Act specifically barred the jurisdiction of Civil Court altogether, whereby all powers that rest with the Civil Court ordinarily under the Arbitration Act cannot be exercised by the same in the present instance. Therefore, the sole jurisdiction to grant interim relief rests with the statutory arbitral tribunal itself.

 

Judgment:

The Supreme Court in the case State of Gujarat v. Amber Builder allowed the appeal, and set aside the judgment of the High Court of Gujarat, with liberty to the contractor to approach the statutory Arbitral Tribunal constituted under the Gujarat Act.

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