MUNICIPAL CORPORATION OF GREATER MUMBAI & ANR. versus PRATIBHA INDUSTRIES LTD. & ORS.

[2018] 14 S.C.R. 1143

MUNICIPAL CORPORATION OF GREATERMUMBAI & ANR.

PRATIBHA INDUSTRIES LTD. & ORS.

(Civil Appeal No. 11822 of 2018)

DECEMBER 04, 2018

[R. F. NARIMAN AND M. R. SHAH, JJ.]

High Courts – Power to recall its order – Appellant issuedTender Notice for supply, installation and maintenance of watermeters – Tender Notice was accepted and parties entered into anagreement, which included clause (cl.13 of the General Conditionsof Contract) stating that “13.1 No Arbitration was allowed” –Respondent filed an application u/s. 9 of the Arbitration andConciliation Act, 1996 seeking interim injunction, which wasallowed – Thereafter on the next date of hearing, sole Arbitratorwas appointed with the consent of both the parties – Recallapplication filed by the appellant stating that the concerned officerof the appellant-Municipal Corporation was not empowered to takedecision regarding appointment of Arbitrator – Single Judge of theHigh Court recalled the order observing that clause 13 of theGeneral Conditions of Contract and clause 22 of the Tender Noticewere not arbitration clauses – Division Bench of High Court setaside the order of Single Judge on ground that there was no provisionin Part-I of the Act for any Court to review its own order – Onappeal, held: High Courts are courts of record, set up u/Art.215 ofthe Constitution – These constitutional courts, being courts of record,the jurisdiction to recall their own orders is inherent by virtue ofthe fact that they are superior courts of record – If any apparenterror is noticed by the High court in respect of any orders passedby it the High Court has not only power, but duty to correct it –Impugned judgment of the Division Bench of the High Court setaside – Constitution of India – Art.215 – Arbitration and ConciliationAct, 1996 – s.9.

National Sewing Thread Co. Ltd. v. James Chadwick &Bros. Ltd. [1953] SCR 1028 ; Shivdev Singh & Ors. v.State of Punjab and Others AIR 1963 SC 1909 ; M.M.

AThomas v. State of Kerala and Another (2000) 1 SCC666 : [2000] 1 SCR 33 – relied on.

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 11822of 2018.

From the Judgment and Order dated 07.02.2018 of the High CourtCof Judicature at Bombay in Commercial Appeal No. 177 of 2017.

Ranjit Kumar, Dhruv Mehta, S. Naphade, Sr. Advs., Ashish Wad,Ms. Priti Puramdare, Mrs. Jayashree Wad, Sidharth Mahajan,Ms. Sukriti Jaggi, M/s. J S Wad And Co, Ms. Tamana Goyal, ChandraPrakash, M/s. D.S.K. Legal, Vipin Kr. Jai, Vipul Jai, Ms. Shelly Dinkar,DSanjay Kapur, Rajiv Kapur, Ms. Khushboo Kapur, C.M. Patel, Advs.for the appearing parties.

The Judgment of the Court was delivered by

R. F. NARIMAN, J.E1. Leave granted.

2. The present appeal raises questions relatable to the High Court’spower of recall of its orders.

3. By Tender Notice dated 19.09.2008, supply, installation andmaintenance of water meters of various sizes were called for. The TenderFNotice contained Clause 22, which reads as under:-

“22. Jurisdiction of Courts:

In case of any claim, dispute or difference arising in respect ofthe contract, the cause of action thereof shall be deemed to haveGarisen in Mumbai and all legal proceedings in respect of any suchclaim, dispute or difference shall be instituted in competent courtin the city of Mumbai only.

If any dispute, difference or claim is raised by either party relatingto any matter arising out of the contract, the aggrieved party mayHrefer such dispute within period of 7 (seven) days to the

concerned Deputy Municipal Commissioner (DMC) of MunicipalCorporation of Greater Mumbai, who shall constitute committeecomprising of 3 (three) MCGM Officers i.e., concerned DMC orDirector (ES & P), Chief Engineer other than the Engineer ofcontract & concerned C.A. the committee shall give decision inwriting within 60 (sixty) days.

Appeal from the order of the Committee may be referred toMunicipal Commissioner (M.C.) of Municipal Corporation ofGreater Mumbai within 7 (seven) days. Thereafter, M.C. shallconstitute the committee comprising of 3 (three) DMC includingDMC in charge of finance Department. The decision given bythis Committee shall be final and binding upon the parties/bidders.”

4. However, when the Tender Notice was accepted and anagreement between the parties was entered into, Clause 13 of the GeneralConditions of Contract was applied. This clause stated as follows:-

“Disputes and Arbitration:

13.1 No Arbitration is allowed.

13.2 In case of disputes or difference of opinion arising betweenthe Hydraulic Engineer and the bidder, the bidder can refer thematter to the Municipal Commissioner of Greater Mumbai withan advance copy to the Hydraulic Engineer and the decision ofCommissioner will be final in such case.”

5. An application under Section 9 of the Arbitration and ConciliationAct, 1996 (in short ‘the Act’) was filed by the respondent before theHigh Court of Bombay, asking for an interim injunction restraining theencashment of the first and third bank guarantees that were given bythe respondent in pursuance of the Tender, amounting to sum of Rs.16,23,400/- (Rupees Sixteen Lakhs, Twenty Three Thousand and FourHundred only) and Rs. 6,23,00,000/- (Rupees Six Crores, Twenty ThreeLakhs only) respectively. On 23.06.2017, this petition was allowed andthe injunction that was prayed for was granted. On the next date ofhearing, i.e., on 27.06.2017, Justice K. R. Shriram recorded whattranspired as follows:-

“1. Mr. Makhija, counsel for Petitioners, on instructions statesthat Petitioners are ready and willing to go for arbitration andsuggest that Mr. Justice V.M. Kanade (retired) be appointed as

the Sole Arbitrator. Mr. Bharucha, senior counsel for Respondent(MCGM), on instructions from Mr. Agashe, Assistant Engineer(Meter Work Shop) City-representative of Respondent, who ispresent in court, states that Respondents have no objection to thesuggestion made by Mr. Makhija and Mr. Justice V.M. Kanade(retired) be appointed as the Sole Arbitrator.

2. In view of the above, Mr. Justice V. M. Kanade (retired) isappointed as the Sole Arbitrator to decide on all issues betweenparties arising out of or in connection with or with reference tothe Tender dated 19.09.2008 along with Corrigendum issued byRespondent No. 1 for supply installation and maintenance of AMRCwater meters of various sizes in the City area of Mumbai consistingof wards A, B, C, D, E, F/North, F/South, G/North and G/South(the Project)…”

6. Notice of Motion was filed by the appellant before us on03.07.2017 to recall the aforesaid order appointing Justice V.M. KanadeD(retired) as Sole Arbitrator. It was clearly stated therein that:-

“I say that the concerned officer Shri A.M. Agashe-Asst. Engineer(Meter Workshop) (City), who was present in the Court was notaware that contract has no arbitration clause which is as follows:-

E“17. Disputes and Arbitration:

13.1 No Arbitration is allowed.

13.2 In case of disputes or difference of opinion arising betweenthe Hydraulic Engineer and the bidder, the bidder can refer thematter to the Municipal Commissioner of Greater Mumbai withFan advance copy to the Hydraulic Engineer and the decisionof Commissioner will be final in such case.”

I say that Shri A.M. Agashe-Asst. Engineer (Meter Workshop)(City) is not empowered to take decision regarding appointmentof the Arbitrator in the above Petition.”

7. By an order dated 12.09.2017, the learned single Judge referredto the recall application and the affidavit of the Commissioner, and alsoreferred to Clause 13 of the General Conditions of Contract and Clause22 of the Tender Notice and observed that they were not arbitrationclauses at all, but in-house proceedings, which could be taken at theHbehest of the aggrieved party. This being so, the learned single Judge

recalled the order appointing Justice V.M. Kanade (retired) as soleArbitrator. An appeal was filed under Section 37 of the Act by therespondent herein, which succeeded before the Division Bench.According to the Division Bench, since Section 5 of the Act mandatedthat there would be no judicial intervention as provided for in Part I ofthe Act and since there is no provision in Part I for any court to reviewits own order, the review petition filed was not maintainable. The impugnedorder would, therefore, have to be set aside. The appeal filed by therespondent under Section 37 was allowed.

8. Shri Ranjit Kumar, leaned senior counsel for the appellant, hasargued before us that it is obvious that on perusal of Clause 13 andClause 22, no arbitration is provided for and that these are only in-houseprocedures. He went on to state that it is always inherent in HighCourt, being court of record, to recall its own orders, and has citedcertain judgments together with the High Court (Original Side) Rules.According to him, the appeal under Section 37 itself was not maintainableand for all these reasons, the impugned order should be set aside.

9. On the other hand, Shri Shekhar Naphade, learned senior counselargued on behalf of the respondent, stating that the Arbitration Act is aself-contained Code, and, this being so, it is not possible to look outsidethe four corners of the Act to find review power. This may apply evento Article 215 of the Constitution of India. He argued that Clause 13 andClause 22 are clearly arbitration clauses inasmuch as dispute has to bereferred for decision to Committee and thereafter to an AppellateCommittee, after which, the decision rendered by the AppellateCommittee is final and binding. According to Shri Naphade, the correctcourse could only have been to apply to Justice V.M. Kanade (retired)under Section 16 of the Act on whether an arbitration clause does ordoes not exist. He added that since the Code of Civil Procedure (in short‘the Code’) will not apply, therefore, there is no question of inherentpower contained in Section 151 of the Code applying either.

10. The clauses which Shri Naphade has referred to as arbitrationclauses cannot, prima facie, be regarded as such. Sub-clause 13.1clearly states, “No Arbitration is allowed”. Sub-clause 13.2 cannot thenbe read as an arbitration clause. Also, on the assumption that Clause 22would be the applicable clause, it is clear that the said clause has amarginal note which reads: Jurisdiction of Courts. The first paragraph ofClause 22 specifically deals with competent courts in the city of Mumbai

Aonly having exclusive jurisdiction in respect of claims, disputes etc. arisingin respect of the contract. The second paragraph and the third paragraph,according to Shri Naphade, would amount to an arbitration clause as theCommittee mentioned therein is to give decision, which is appealedagain before another Committee which gives decision which shall befinal and binding upon both the parties. We are of the view that ClauseB22 deals with disputes that may arise under the agreement which caneither be dealt with by an in-house procedure or by courts, as the casemay be. By no stretch of imagination could this in-house procedure bestated to be an agreement to arbitrate between the parties. In any case,what is important on the facts of this case, is that neither of these clausesChas been invoked. The Court’s order dated 27.06.2017, clearly showsthat Justice Kanade was appointed as Sole Arbitrator thanks to Mr.Agashe, Assistant Engineer, having no objection to the same. As hasbeen stated in the recall application and the affidavit of the Commissioner,Mr. Agashe was not empowered to take any decision regardingappointment of an Arbitrator. This being the undisputed position beforeDthe Court, it is clear that an oral agreement between the parties de horsClause 13 and Clause 22 could not have been arrived at. We must alsoremind ourselves that this agreement was arrived at during the courseof hearing of Section 9 petition. In the present case, nobody has appliedunder Section 11 to appoint an Arbitrator in accordance with either ClauseE13 or Clause 22.11. Insofar as the High Courts’ jurisdiction to recall its own orderis concerned, High Courts are courts of record, set up under Article 215of the Constitution of India. Article 215 of the Constitution of India readsas under:-F“Article 215. High Courts to be courts of record.— EveryHigh Court shall be court of record and shall have all the powersof such court including the power to punish for contempt ofitself.”

It is clear that these constitutional courts, being courts of record,Gthe jurisdiction to recall their own orders is inherent by virtue of the factthat they are superior courts of record. This has been recognized inseveral of our judgments.

12. In National Sewing Thread Co. Ltd. v. James Chadwick& Bros. Ltd., 1953 SCR 1028, this Court has held as under:-

“……The Trade Marks Act does not provide or lay down anyprocedure for the future conduct or career of that appeal in theHigh Court, indeed Section 77 of the Act provides that the HighCourt can if it likes make rules in the matter. Obviously after theappeal had reached the High Court it has to be determinedaccording to the rules of practice and procedure of that Court andin accordance with the provisions of the charter under which thatCourt is constituted and which confers on it power in respect tothe method and manner of exercising that jurisdiction. The rule iswell settled that when statute directs that an appeal shall lie to aCourt already established, then that appeal must be regulated bythe practice and procedure of that Court. This rule was verysuccinctly stated by Viscount Haldane L.C. in NationalTelephone Co. Ltd. v. Postmaster-General, [1913] A.C. 546 inthese terms:-

“When question is stated to be referred to an establishedCourt without more, it, in my opinion, imports that the ordinaryincidents of the procedure of that Court are to attach, and alsothat any general right of appeal from its decision likewiseattaches.”

The same view was expressed by their Lordships of the PrivyCouncil in R.M.A.R.A. Adaikappa Chettiar v. Ra.Chandrasekhara Thevar, (1947) 74 I.A. 264, wherein it wassaid:-

“Where legal right is in dispute and the ordinary Courts ofthe country are seized of such dispute the Courts are governedby the ordinary rules of procedure, applicable thereto and anappeal lies if authorised by such rules, notwithstanding that thelegal right claimed arises under special statute which doesnot, in terms confer right of appeal.”

Again in Secretary of State for India v. Chellikani Rama Rao,(1916) I.L.R. 39 Mad. 617, when dealing with the case under theMadras Forest Act their Lordships observed as follows:-

A“It was contended on behalf of the appellant that all furtherproceedings in Courts in India or by way of appeal wereincompetent, these being excluded by the terms of the statutejust quoted. In their Lordships’ opinion this objection is not well-founded. Their view is that when proceedings of this characterreach the District Court, that Court is appealed to as one ofBthe ordinary Courts of the country, with regard to whoseprocedure, orders, and decrees the ordinary rules of the CivilProcedure Code apply.”

Though the facts of the cases laying down the above rule werenot exactly similar to the facts of the present case, the principleenunciated therein is one of general application and has an appositeapplication to the facts and circumstances of the present case.Section 76 of the Trade Marks Act confers right of appeal tothe High Court and says nothing more about it. That being so, theHigh Court being seized as such of the appellate jurisdictionconferred by section 76 it has to exercise that jurisdiction in the

same manner as it exercises its other appellate jurisdiction andwhen such jurisdiction is exercised by single Judge, his judgmentbecomes subject to appeal under Clause 15 of the Letters Patentthere being nothing to the contrary in the Trade Marks Act.”

13. To similar effect is our judgment in Shivdev Singh & Ors. v.State of Punjab and Others, AIR 1963 SC 1909, wherein this Courthas stated as under:

“10. … It is sufficient to say that there is nothing in Article 226 ofthe Constitution to preclude High Court from exercising thepower of review which inheres in every Court of plenaryjurisdiction to prevent miscarriage of justice or to correct graveand palpable errors committed by it…”

14. Also, in M.M. Thomas v. State of Kerala and Another,(2000) 1 SCC 666, this Court has held as follows:-

“14. The High Court as court of record, as envisaged in Article215 of the Constitution, must have inherent powers to correct therecords. court of record envelops all such powers whose actsand proceedings are to be enrolled in perpetual memorial andtestimony. court of record is undoubtedly superior court whichis itself competent to determine the scope of its jurisdiction. The

High Court, as court of record, has duty to itself to keep all itsrecords correctly and in accordance with law. Hence, if anyapparent error is noticed by the High Court in respect of anyorders passed by it the High Court has not only power, but dutyto correct it. The High Court’s power in that regard is plenary. InNaresh Shridhar Mirajkar & Ors. v. State of Maharashtra,AIR 1967 SC 1 : [1966] 3 SCR 744, nine-Judge Bench of thisCourt has recognised the aforesaid superior status of the HighCourt as court of plenary jurisdiction being court of record.”15. Insofar as Shri Naphade’s arguments that the Act is self-contained Code, Section 5 of which interdicts review or recallapplication, suffice it to state that having held that there is no arbitrationagreement pursuant to the order dated 27.06.2017, the Act will not apply.

16. This being the case, the impugned judgment of the DivisionBench of the High Court is set aside. Shri Naphade urges us to continuethe order dated 23.06.2017 for period of four weeks from today sothat he may approach the appropriate forum. We continue the said orderfor period of four weeks from today. The appeal is disposed ofaccordingly.

Ankit Gyan

Appeal disposed of.