# THE SECRETARY TO GOVT. OF KERALA, IRRIGATION DEPARTMENT AND OTHERS v. JAMES VARGHESE AND OTHERS

- **Citation:** [2022] 3 S.C.R. 389
- **Court:** Supreme Court of India
- **Decided:** 2022-05-04
- **Case number:** Civil Appeal No. 6258 of 2014
- **Bench:** L. Nageswara Rao, B. R. Gavai
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/the-secretary-to-govt-of-kerala-irrigation-department-and-others-v-james-35943
- **Pages:** 82

## Headnote

Kerala Revocation of Arbitration Clauses and Reopening of
Awards Act, 1998 - Constitutional validity of - Challenged, on
ground of legislative competence of the State Legislature -
Agreements relating to a State Irrigation Project - Disputes -
Arbitration references - State enacted Kerala Act of 1998 which
provided for cancellation of arbitration clauses in the agreements,
revocation of authority of the arbitrators appointed thereunder and
filing of appeals against awards or decrees already passed in certain
arbitration references in respect of which period of limitation had
expired - Whether the State Legislature had the legislative
competence to enact the Kerala Act of 1998 - Held: The Kerala Act
of 1998 in pith and substance is referable to Entry 13 of List III of
Seventh Schedule to the Constitution and not to the Entries 12, 13,
14 and 37 of List I of the Seventh Schedule nor to Art.253 of the
Constitution - The Kerala Act of 1998, therefore, is within the
legislative competence of the State Legislature - In any case, in
view of the Presidential assent u/Art.254(2) of the Constitution, the
Kerala Act of 1998 would prevail within the State of Kerala -
Constitution of India, 1950 - Seventh Schedule, List III, Entry 13
and Art.254(2) - Arbitration Act, 1940 - Doctrines / Principles -
Doctrine of pith and substance.
Kerala Revocation of Arbitration Clauses and Reopening of
Awards Act, 1998 - Constitutional validity of - Challenged, on
ground of encroachment upon judicial powers of the State -
Agreements relating to a State Irrigation Project - Disputes -
Arbitration references - State enacted Kerala Act of 1998 which
provided for cancellation of arbitration clauses in the agreements,
revocation of authority of the arbitrators appointed thereunder and
filing of appeals against awards or decrees already passed in certain
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arbitration references in respect of which period of limitation had
expired - Whether the Kerala Act of 1998 encroached on judicial
powers of the courts and as such, was hit by the doctrine of
separation of powers - Held: Though a law enacted by the
Legislature may apparently seem to be within its competence but yet
in substance if it is shown as an attempt to interfere with the judicial
process, such law may be invalidated being in breach of doctrine
of separation of powers - The Kerala Act of 1998, which has the
effect of annulling the awards which have become "Rules of Court",
is a transgression on the judicial functions of the State and therefore,
violative of doctrine of "separation of powers" - The Kerala Act of
1998 encroaches upon the judicial powers of the State and is
therefore liable to be struck down as being unconstitutional on this
count - Doctrines/Principles - Doctrine of "separation of powers".
Constitution of India, 1950 - Seventh Schedule, List III, Entry
13 -Arbitration - Legislative competence of the State Legislature -
Held: The subject of arbitration finds place in Entry 13 of List III,
i.e., the Concurrent List of the Seventh Schedule to the Constitution
- Since the subject of arbitration is in the Concurrent List, the State
can also make a law with regard to the same.
Constitution of India, 1950 - Art.254, clause (2) - Conflict
between the Central law and the State law - Held: Ordinarily, if
there is any conflict between the Central law and the State law, in
view of clause (1) of Art.254, the Central law would prevail -
However, in view of clause (2) of Art.254, the State law would prevail
when it is reserved for consideration and receives assent of the
President of India.
Legislature - State Legislature - Legislative competence of -
Challenge to, on ground that it encroached upon the legislative
competence of the Parliament - Held: In such a situation, the
doctrine of pith and substance has to be applied to determine as to
which entry does a given piece of legislation relate to - Once it is
so determined, any incidental trenchi

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389
THE SECRETARY TO GOVT. OF KERALA, IRRIGATION
DEPARTMENT AND OTHERS
v.
JAMES VARGHESE AND OTHERS
(Civil Appeal No. 6258 of 2014)
MAY 04, 2022
[L. NAGESWARA RAO AND B. R. GAVAI, JJ.]
Kerala Revocation of Arbitration Clauses and Reopening of
Awards Act, 1998 - Constitutional validity of - Challenged, on
ground of legislative competence of the State Legislature -
Agreements relating to a State Irrigation Project - Disputes -
Arbitration references - State enacted Kerala Act of 1998 which
provided for cancellation of arbitration clauses in the agreements,
revocation of authority of the arbitrators appointed thereunder and
filing of appeals against awards or decrees already passed in certain
arbitration references in respect of which period of limitation had
expired - Whether the State Legislature had the legislative
competence to enact the Kerala Act of 1998 - Held: The Kerala Act
of 1998 in pith and substance is referable to Entry 13 of List III of
Seventh Schedule to the Constitution and not to the Entries 12, 13,
14 and 37 of List I of the Seventh Schedule nor to Art.253 of the
Constitution - The Kerala Act of 1998, therefore, is within the
legislative competence of the State Legislature - In any case, in
view of the Presidential assent u/Art.254(2) of the Constitution, the
Kerala Act of 1998 would prevail within the State of Kerala -
Constitution of India, 1950 - Seventh Schedule, List III, Entry 13
and Art.254(2) - Arbitration Act, 1940 - Doctrines / Principles -
Doctrine of pith and substance.
Kerala Revocation of Arbitration Clauses and Reopening of
Awards Act, 1998 - Constitutional validity of - Challenged, on
ground of encroachment upon judicial powers of the State -
Agreements relating to a State Irrigation Project - Disputes -
Arbitration references - State enacted Kerala Act of 1998 which
provided for cancellation of arbitration clauses in the agreements,
revocation of authority of the arbitrators appointed thereunder and
filing of appeals against awards or decrees already passed in certain
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[2022] 3 S.C.R.
arbitration references in respect of which period of limitation had
expired - Whether the Kerala Act of 1998 encroached on judicial
powers of the courts and as such, was hit by the doctrine of
separation of powers - Held: Though a law enacted by the
Legislature may apparently seem to be within its competence but yet
in substance if it is shown as an attempt to interfere with the judicial
process, such law may be invalidated being in breach of doctrine
of separation of powers - The Kerala Act of 1998, which has the
effect of annulling the awards which have become "Rules of Court",
is a transgression on the judicial functions of the State and therefore,
violative of doctrine of "separation of powers" - The Kerala Act of
1998 encroaches upon the judicial powers of the State and is
therefore liable to be struck down as being unconstitutional on this
count - Doctrines/Principles - Doctrine of "separation of powers".
Constitution of India, 1950 - Seventh Schedule, List III, Entry
13 -Arbitration - Legislative competence of the State Legislature -
Held: The subject of arbitration finds place in Entry 13 of List III,
i.e., the Concurrent List of the Seventh Schedule to the Constitution
- Since the subject of arbitration is in the Concurrent List, the State
can also make a law with regard to the same.
Constitution of India, 1950 - Art.254, clause (2) - Conflict
between the Central law and the State law - Held: Ordinarily, if
there is any conflict between the Central law and the State law, in
view of clause (1) of Art.254, the Central law would prevail -
However, in view of clause (2) of Art.254, the State law would prevail
when it is reserved for consideration and receives assent of the
President of India.
Legislature - State Legislature - Legislative competence of -
Challenge to, on ground that it encroached upon the legislative
competence of the Parliament - Held: In such a situation, the
doctrine of pith and substance has to be applied to determine as to
which entry does a given piece of legislation relate to - Once it is
so determined, any incidental trenching on the field reserved to the
other legislature is of no consequence - Predominance of the Union
List would not prevent the State Legislature from dealing with any
matter within List II, though it may incidentally affect any item in
List I - If the State is competent to legislate on the subject, any
incidental encroachment on any item in List I would not affect the
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State Legislature - Constitution of India, 1950 - Seventh Schedule
- Lists I, II and III.
Arbitration Act, 1940 - Powers exercised by the court under
provisions of the Act in passing judgments and decrees for making
the arbitration awards "Rule of Court" - Nature of - Held: They
are judicial powers - Power to make an arbitration award "Rule of
Court" is not a mechanical power.
Doctrines / Principles - "Separation of powers doctrine"
under the Constitution - Discussed.
United Nations Commission on International Trade Law
(UNCITRAL) Model Law on International Commercial Arbitration
- Resolution dated 11th December 1985 passed by the United Nations
General Assembly - Effect of - Held: The General Assembly only
recommended the adoption of UNCITRAL Model Law insofar as
international commercial arbitration practices are concerned -
Parliament, with certain modifications, has given due consideration
to UNCITRAL Model Law for legislation on domestic arbitration -
However, that cannot by itself be said to be binding on the Parliament
to enact the law in accordance with UNCITRAL Model Law -
Arbitration and Conciliation Act, 1996.
Disposing the appeals, the Court
HELD:
LEGISLATIVE COMPETENCE OF
THE STATE
LEGISLATURE TO ENACT THE KERALA REVOCATION OF
ARBITRATION CLAUSES AND REOPENING OF AWARDS
ACT, 1998:
1.1. The subject of arbitration finds place in Entry 13 of
List III, i.e., the Concurrent List of the Seventh Schedule to the
Constitution of India. The legislation pertaining to the said entry
could be made either by the Parliament or the State Legislature.
Since the subject of arbitration is in the Concurrent List, the
State can also make a law with regard to the same. The only
requirement is that to validate such a law, it is necessary to
reserve the same for consideration of the President of India and
obtain his assent. When such an assent is obtained, the provisions
of the State Law or Act so enacted would prevail in the State
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concerned, notwithstanding its repugnancy with an earlier
Parliamentary enactment made on the subject. In the present
case also, the Kerala Revocation of Arbitration Clauses and
Reopening of Awards Act, 1998 (the State Act) was reserved for
consideration of the President of India and the assent of the
President of India has been obtained. As such, the State Act so
enacted would prevail in the State of Kerala. [Para 62][423-G-H;
424-A-B]
1.2. Ordinarily, if there is any conflict between the Central
law and the State law, in view of clause (1) of Article 254 of the
Constitution of India, the Central law would prevail. However, in
view of clause (2) of Article 254 of the Constitution of India, the
State law would prevail when it is reserved for consideration and
receives assent of the President of India. [Para 66][425-G-H;
426-A]
1.3. When the legislative competence of a State Legislature
is questioned on the ground that it encroaches upon the
legislative competence of the Parliament, since some entries are
bound to be overlapping, in such a situation, the doctrine of pith
and substance has to be applied to determine as to which entry
does a given piece of legislation relate to. Once it is so
determined, any incidental trenching on the field reserved to the
other legislature is of no consequence. The court has to look at
the substance of the matter. The true character of the legislation
has to be ascertained. Regard must be had to the enactment as a
whole, to its main objects and to the scope and effect of its
provisions. Incidental and superficial encroachments are to be
disregarded. The predominance of the Union List would not
prevent the State Legislature from dealing with any matter within
List II, though it may incidentally affect any item in List I.
[Para 71][431-D-G]
1.4. If one looks at the scheme of the State enactment, the
subject matter of the enactment is arbitration. If the State is
competent to legislate on the subject, any incidental
encroachment on any item in List I would not affect the State
Legislature. [Para 72][431-G-H]
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State of West Bengal v. Kesoram Industries Ltd. and
Others (2004) 10 SCC 201 : [2004] 1 SCR 564 -
followed.
G.C. Kanungo v. State of Orissa, (1995) 5 SCC 96:
[1995] 1 Suppl. SCR 510; Madhya Pradesh Rural Road
Development Authority and Another v. L.G. Chaudhary
Engineers and Contractors (2018) 10 SCC 826 and G.
Mohan Rao and Others v. State of Tamil Nadu and
Others, 2021 SCC online SC 440 - relied on.
Maharaj Umeg Singh and Others v. State of Bombay
and Others [1955] 2 SCR 164; State of Gujarat through
Chief Secretary and Another v. Amber Builders (2020)
2 SCC 540; Madhya Pradesh Rural Road Development
Authority and Another v. L.G. Chaudhary Engineers and
Contractors (2012) 3 SCC 495 : [2012] 2 SCR 162;
Hoechst Pharmaceutical Ltd. and Others v. State of
Bihar and Others (1983) 4 SCC 45 : [1983] 3 SCR
130; Kavalappara Kottarathil Kochuni @ Moopil Nayar
v. States of Madras and Kerala and Others [1960] 3
SCR 887; M. K. Ranganathan v. Government of Madras
and Others [1955] 2 SCR 374; Calcutta Gas Company
(Proprietary) Ltd. v. State of West Bengal and Others
[1962] Supp 3 SCR 1; Sri Venkataramana Devaru and
Others v. State of Mysore and Others [1958] SCR 895;
Fuerst Day Lawson Limited v. Jindal Exports Limited
(2011) 8 SCC 333 : [2011] 11 SCR 1; Rajiv Sarin and
Another v. State of Uttarakhand and Others (2011) 8
SCC 708 : [2011] 9 SCR 1012; Maganbhai Ishwarbhai
Patel Etc. v. Union of India and Another (1970) 3 SCC
400 : [1969] 3 SCR 254; State of Bihar and Others v.
Bihar Chamber of Commerce and Others (1996) 9 SCC
136 : [1996] 2 SCR 184; Jayant Verma and Others v.
Union of India and Others (2018) 4 SCC 743 : [2018]
2 SCR 679; Suraj Mall Mohta and Co. v. A.V.
Visvanatha Sastri and Another [1955] 1 SCR 448; B.B.
Rajwanshi v. State of U.P. and Others (1988) 2 SCC
415 : [1988] 3 SCR 469; Satish Kumar and Others v.
Surinder Kumar and Others [1969] 2 SCR 244; Andhra
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Pradesh Dairy Development Corporation Federation
v. B. Narasimha Reddy and Others (2011) 9 SCC 286:
[2011] 14 SCR 1; Ssangyong Engineering and
Construction Company Limited v. National Highways
Authority of India (NHAI) (2019) 15 SCC 131 : [2019]
7 SCR 522; SREI Infrastructure Finance Limited v. Tuff
Drilling Private Limited (2018) 11 SCC 470 : [2017]
12 SCR 933; Saverbhai Amaidas v. State of Bombay
[1955] 1 SCR 799; T. Barai v. Henry Ah Hoe and
Another (1983) 1 SCC 177 : [1983] 1 SCR 90; Gram
Panchayat of Village Jamalpur v. Malwinder Singh and
Others (1985) 3 SCC 661 : [1985] 2 Suppl.
SCR 28; State of Maharashtra v. Mrs. Kamal Sukumar
Durgule and Others (1985) 1 SCC 234 : [1985] 2 SCR
129; Ashok Kumar alias Golu v. Union of India and
Others (1991) 3 SCC 498 : [1991] 2 SCR 858; S.S.
Bola and Others v. B.D. Sardana and Others (1997) 8
SCC 522 : [1997] 2 Suppl. SCR 507; Madras Bar
Association v. Union of India and Another 2021 SCC
OnLine SC 463; State of Kerala and Others v. Mar
Appraem Kuri Company Limited and Another (2012) 7
SCC 106 : [2012 4 SCR 448; State of Tamil Nadu and
Others v. K. Shyam Sunder and Others (2011) 8 SCC
737 : [2011] 11 SCR 1094; Deep Chand and Others v.
State of Uttar Pradesh and Others [1959] Supp 2 SCR
8; Ladli Construction Co. (P) Ltd. v. Punjab Police
Housing Corpn. Ltd. and Others (2012) 4 SCC 609 :
[2012] 4 SCR 780; Hindustan Construction Co. Ltd.
and Another v. Union of India and Others (2020) 17
SCC 324: [2019] 17 SCR 331; K. Nagaraj and Others
v. State of Andhra Pradesh and Another (1985) 1 SCC
523 : [1985] 2 SCR 579; Nagpur Improvement Trust
and Another v. Vithal Rao and Others (1973) 1 SCC
500; State of Kerala and Others v. T.M. Peter and Others
(1980) 3 SCC 554; Cauvery Water Disputes Tribunal,
1993 Supp (1) SCC 96 (2) : [1991] 2 Suppl. SCR 497
and State of Bombay and Another v. United Motors
(India) Limited and Others [1953] SCR 1069 - referred
to.
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WHETHER THE ARBITRATION AND CONCILIATION
ACT, 1996 HAVING BEEN ENACTED BY THE PARLIAMENT
UNDER ARTICLE 253 OF THE CONSTITUTION AND IN
ACCORDANCE WITH THE DECISION TAKEN AT THE
INTERNATIONAL CONFERENCE TO IMPLEMENT THE
UNCITRAL MODEL LAW, THE STATE LEGISLATURE IS
NOT COMPETENT TO ENACT THE STATE ACT.
2.1. The Preamble of the Arbitration and Conciliation Act,
1996 reveals that the recommendation of the General Assembly
of the United Nations is for adopting UNCITRAL Model Law
insofar as international commercial arbitrations are concerned.
Further, paragraphs (2) and (3) of the Statement of Objects and
Reasons of the 1996 Act clearly reveals that the General Assembly
of the United Nations has recommended that all countries give
due consideration to the UNCITRAL Model Law, in view of the
desirability of uniformity of the law of arbitral procedures and the
specific needs of international commercial arbitration practices.
There is thus no binding decision at the General Assembly of the
United Nations to implement the UNCITRAL Model Law. In any
case, that recommendation is with regard to only international
commercial arbitration practices. No doubt that the Parliament,
with certain modifications, has given due consideration to the
UNCITRAL Model Law for legislation on the domestic
arbitration. However, that cannot by itself be said to be binding
on the Parliament to enact the law in accordance with UNCITRAL
Model Law. [Paras 77, 78 and 79][433-D-E; 434-D-F]
2.2. A perusal of the Resolution dated 11th December 1985
passed by the United Nations General Assembly (40/72. Model
Law on International Commercial Arbitration of the United
Nations Commission on International Trade Law) clearly reveals
that what has been done by the United Nations General Assembly
vide the aforesaid Resolution is to recommend to all the States
to give due consideration to the Model Law on international
commercial arbitration. However, it does not create any binding
obligation on the States to enact the UNCITRAL Model Law as
it is. [Paras 80, 81][435-G-H]
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2.3. The 1996 Act is enacted on the basis of the Resolution
passed by the General Assembly of the United Nations in 1985,
whereby the General Assembly only recommended the adoption
of UNCITRAL Model Law insofar as international commercial
arbitration practices are concerned. The Resolution of the General
Assembly of the United Nations is only recommendatory in nature
and there is no binding decision taken thereat. [Para 85]
[437-F-H]
S. Jagannath v. Union of India and Others (1997) 2
SCC 87 : [1996] 9 Suppl. SCR 848 and Mantri Techzone
Private
Limited v. Forward Foundation and Others
(2019) 18 SCC 494 - held inapplicable.
STATE LEGISLATURE'S ENCROACHMENT ON
JUDICIAL POWERS:
3.1. The State Act is liable to be held unconstitutional on
the ground of encroachment upon the judicial powers of the State.
[Para 126][469-D]
3.2. In the present case, all the awards so also the judgments
and decrees passed by the civil courts making such awards "Rules
of Court" have been passed under the Arbitration Act, 1940. The
perusal of the scheme of the Arbitration Act, 1940 would itself
reveal that the passing of the judgment and decree under Section
17 of the 1940 Act is not a mere formality. The judgment can be
pronounced only when the court is satisfied that no cause is made
out for remitting the award or setting aside the award. The court
is also entitled to remit or modify the awards. As such, it cannot
be said that the court, while passing a judgment, which is followed
by a decree, does not exercise judicial power. The court is not
supposed to act mechanically and be a Post-Office. The powers
exercised by the court under the provisions of the 1940 Act are
judicial powers and the power to make an award "Rule of Court"
is not a mechanical power. [Paras 94, 100 and 113][444-H; 445A; 447-E-G; 461-A-B]
3.3. Though a law enacted by the Legislature may apparently
seem to be within its competence but yet in substance if it is
shown as an attempt to interfere with the judicial process, such
law may be invalidated being in breach of doctrine of separation
of powers. [Para 120][466-D-E]
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3.4. A perusal of the various provisions of the State Act
would clearly show that the State Act has been enacted since the
State Government was aggrieved by various awards passed against
it. It was therefore found expedient, in the public interest, to
cancel the arbitration clause in the agreement, to revoke the
authority of the arbitrators appointed thereunder and to enable
the filing of appeals against the awards or decrees. Most of the
awards were made "Rules of Court" prior to 1993. In many of
the cases, appeals were also preferred by the State Government.
As such, it is found that the legislative prescriptions and
legislative directions in the State Act undoubtedly interfere with
the judicial functions. It is also clear that the legislation is targeted
at the awards passed which have become "Rule of Court". The
powers exercised by the courts under Section 17 of the 1940 Act
are judicial powers of the State. Upon consideration of the terms
of the State Act, the issues with which it deals, it is clear that the
State Act interferes with the judicial functions. [Para 121]
[466-G-H; 467-A-C]
3.5. What has been done by the State Act, is annulling the
awards and the judgments and decrees passed by the court vide
which the awards were made "Rule of Court". As such, the rights
which accrued to the parties much prior to the enactment of the
State Act have been sought to be taken away by it. The State Act,
which has the effect of annulling the awards which have become
"Rules of Court", is a transgression on the judicial functions of
the State and therefore, violative of doctrine of "separation of
powers". As such, the State Act is liable to be declared
unconstitutional on this count. [Paras 122, 125][467-C-D;
469-C]
G.C. Kanungo v. State of Orissa (1995) 5 SCC 96 :
[1995] 1 Suppl. SCR 510 - held per incuriam and also
hit by rule of sub silentio.
Harinagar Sugar Mills Ltd. v. Shyam Sundar
Jhunjhunwala and Others [1962] 2 SCR 339;
Shankarlal Aggarwala and Others v. Shankarlal
Poddar and Others (1964) 1 SCR 717; Bengal Immunity
Company Limited v. State of Bihar and Others [1955] 2
SCR 603; SBP & Co. v. Patel Engineering Ltd. and
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Another (2005) 8 SCC 618 : [2005] 4 Suppl. SCR 688
and State of Tamil Nadu v. State of Kerala and Another
(2014) 12 SCC 696 : [2014] 12 SCR 875 - followed.
State of U.P. and Another v. Synthetics and Chemicals
Ltd. and Another (1991) 4 SCC 139: [1991] 3 SCR 64;
Sundeep Kumar Bafna v. State of Maharashtra and
Another (2014) 16 SCC 623 : [2014] 4 SCR 486; Steel
Authorityof India Ltd. v. J.C. Budharaja, Government
and Mining Contractor (1999) 8 SCC 122 : [1999]
2 Suppl. SCR 155; P. Tulsi Das and Others v. Govt. of
A.P. and Others (2003) 1 SCC 364 : [2002] 3 Suppl.
SCR 306 and Ramachandra Reddy & Co. v. State of
A.P. and Others (2001) 4 SCC 241 : [2001] 2 SCR 186
- relied on.
CONCLUSION:
4.1. The State Act in pith and substance is referable to Entry
13 of List III of the Seventh Schedule to the Constitution of India
and not to the Entries 12, 13, 14 and 37 of List I of the Seventh
Schedule nor to Article 253 of the Constitution of India. The State
Act, therefore, is within the legislative competence of the State
Legislature. In any case, in view of the Presidential assent under
Article 254(2) of the Constitution of India, the State Act would
prevail within the State of Kerala. The finding of the High
Court of Kerala, to the contrary, is erroneous in law.
[Para 127][469-E-G]
4.2. The finding in the case of G.C. Kanungo to the effect
that the powers exercised by the courts in passing judgments
and decrees for making the arbitration awards "Rule of Court"
is not an exercise of judicial power, is per incuriam the provisions
of the 1940 Act and the judgments of the Constitution Bench in
the cases of Harinagar Sugar Mills Ltd. and Shankarlal Aggarwala
and Others. [Para 127][469-G-H]
4.3. The High Court of Kerala is right in law in holding that
the State Act encroaches upon the judicial power of the State and
is therefore liable to be struck down as being unconstitutional.
[Para 127][470-A-B]
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Case Law Reference
[1955] 2 SCR 164
referred to
Para 17
(2020) 2 SCC 540
referred to
Para 18
[2012] 2 SCR 162
referred to
Para 18
(2018) 10 SCC 826
relied on
Para 18
[1983] 3 SCR 130
referred to
Para 20
[2004] 1 SCR 564
followed
Para 20
[1960] 3 SCR 887
referred to
Para 21
[1955] 2 SCR 374
referred to
Para 22
[1962] Supp 3 SCR 1
referred to
Para 23
[1958] SCR 895
referred to
Para 23
[2011] 11 SCR 1
referred to
Para 26
[2011] 9 SCR 1012
referred to
Para 27
[1969] 3 SCR 254
referred to
Para 31
[1996] 9 Suppl. SCR 848
held inapplicable
Para 31
(2019) 18 SCC 494
held inapplicable
Para 32
[1996] 2 SCR 184
referred to
Para 32
[2018] 2 SCR 679
referred to
Para 32
[1955] 1 SCR 448
referred to
Para 33
[1988] 3 SCR 469
referred to
Para 33
[1969] 2 SCR 244
referred to
Para 36
[2011] 14 SCR 1
referred to
Para 37
[2019] 7 SCR 522
referred to
Para 38
[2017] 12 SCR 933
referred to
Para 39
[1955] 1 SCR 799
referred to
Para 41
[1983] 1 SCR 90
referred to
Para 41
[1985] 2 Suppl. SCR 28
referred to
Para 42
THE SECRETARY TO GOVT. OF KERALA, IRRIGATION
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[1985] 2 SCR 129
referred to
Para 43
[1991] 2 SCR 858
referred to
Para 44
[1997] 2 Suppl. SCR 507
referred to
Para 44
[2012] 4 SCR 448
referred to
Para 46
[2011] 11 SCR 1094
referred to
Para 48
[1959] 2 Suppl. SCR 8
referred to
Para 48
[2012] 4 SCR 780
referred to
Para 49
[2019] 17 SCR 331
referred to
Para 50
[1985] 2 SCR 579
referred to
Para 53
(1973) 1 SCC 500
referred to
Para 55
(1980) 3 SCC 554
referred to
Para 55
[1995] 1 Suppl. SCR 510
relied on
Para 61
[1991] 2 Suppl. SCR 497
referred to
Para 92
[1962] 2 SCR 339
followed
Para 101
[1964] 1 SCR 717
followed
Para 105
[1955] 2 SCR 603
followed
Para 109
[1953] SCR 1069
referred to
Para 109
[1991] 3 SCR 64
relied on
Para 110
[2014] 4 SCR 486
relied on
Para 111
[1995] 1 Suppl. SCR 510
held per incuriam
Para 112
and also hit by rule
of sub silentio
[1999] 2 Suppl. SCR 155
relied on
Para 114
[2001] 2 SCR 186
relied on
Para 115
[2005] 4 Suppl. SCR 688
followed
Para 116
[2014] 12 SCR 875
followed
Para 119
[2002] 3 Suppl. SCR 306
relied on
Para 123
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CIVIL APPELLATE JURISDICTION : Civil Appeal No.6258
of 2014.
From the Judgment and Order dated 09.07.2013 of the High Court
of Kerala at Ernakulam in O.P. No.4206 of 1998.
With
Civil Appeal Nos. 9236, 9241, 9226, 6268, 6264, 6265, 6266, 6260,
6262, 6259, 6267 of 2014, Civil Appeal No.295 of 2015, Civil Appeal
Nos.6261, 8995, 9022, 9016, 9005, 8998, 9009, 8997, 9002, 8996, 8999,
9007, 9004, 9003, 9008, 9017, 9000, 9001, 9215, 9213, 9018, 9217, 9006,
9019, 9219, 9237, 9225, 9221, 9238, 9023, 9243, 9244, 9224, 9212, 9211,
9222, 9020, 9210 And 9239 of 2014, Civil Appeal No.3010 of 2017, Civil
Appeal Nos.2824, 2825 And 2826 of 2022.
Krishnan Venugopal, Jaideep Gupta, Pallav Sisodia, Prashanto
Chandra Sen, C. N. Sreekumar, Sr. Advs., Kuriakose Varghese, V.
Shyamohan, Surya Prakash, Kaushik Mishra, Ms. Deepanshi Ishar, Ms.
Pallavi Srivastava, J. Rajesh, Ms. Astu Khandelwal, Akshat Gogna, M/
s Kmnp Law, C. K. Sasi, Abdullah Naseeh, Ms. Meena P., Ms. Manika
Priya Saravanan, Riddhi Bose, Siddharth, Abraham C. Mathews,
Mohammed Sadique T. A., Ms. Anu K. Joy, Alim Anvar, Rajeev Mishra,
Sanand Ramakrishnan, Sunil Narayanan, John Mathew, Babu Thomas
K., Wills Mathews, Ginesh P., Devendra Kumar Tiwari, Paul John Edison,
Rabin Majumder, Ms. Abhisree Saujanya, Ms. Haripriya Padmanabhan,
Ms. Ishita Chowdhury, Ms. Tanya Srivastava, Roy Abraham, Ms. Reena
Roy, Akhil Abraham, Aditya Koshy, Himinder Lal, Aljo K. Joseph, Ms.
Shela K., Mrs. Sudha Gupta, Ranjan Kumar, Ritesh Kumar Chowdhary,
Rajesh P., Ms. Anupama Kumar, Amit Sharma, Prakash Ranjan Nayak,
P. I. Jose, Prashant K. Sharma, Ms. Jenis V. Francis, K. V. Mohan,
Merry S. Mathew, Hitesh Kumar Sharma, Akhileshwar Jha, Ms. K. M.
Kavitha, Pukhrambam Ramesh Kumar, Ms. Anupama Ngangom, Karun
Sharma, Nishe Rajen Shonker, Jogy Scaria, G. Prakash, Advs. for the
appearing parties.
The Judgment of the Court was delivered by
B. R. GAVAI, J.
1. Two important questions of law, with regard to the legislative
competence of the Kerala State Legislature to enact the Kerala
Revocation of Arbitration Clauses and Reopening of Awards Act, 1998
THE SECRETARY TO GOVT. OF KERALA, IRRIGATION
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(hereinafter referred to as the "State Act") and as to whether the State
Act encroaches upon the judicial power of the State, are involved in the
present appeals.
• BACKGROUND:
2. The High Court of Kerala at Ernakulam, by the impugned
judgment dated 9th July 2013 delivered in O.P. No.4206 of 1998 and
companion matters, has held the State Act to be beyond the legislative
competence of the Kerala State Legislature and as such, held the same
to be unconstitutional. The High Court has also held that the State Act
had an effect of annulling the awards of the arbitrators and the judgments
and decrees passed by the courts. It was therefore held that the State
Act encroaches upon the judicial power of the State. Being aggrieved
thereby, the State of Kerala has approached this Court by filing various
appeals.
3. The State of Kerala had started the construction of Kallada
Irrigation Project (hereinafter referred to the "said Project") in the year
1961. The said project was proposed to be executed with the financial
assistance from the International Bank for Reconstruction and
Development (for short "World Bank") from June 1982 to March 1989.
As required by the World Bank, a special condition namely, the Local
Competitive Bidding Specification (hereinafter referred to as "LCBS")
as envisaged by the World Bank Authorities was included in the
agreements relating to the works connected with the said Project.
Clauses 51 and 52 of the LCBS provided for the settlement of matters in
dispute or difference through arbitration. The same was provided with a
view to enable speedy settlement of matters in dispute or difference in a
just and equitable manner. The State of Kerala found that on account of
various disputes and differences, the arbitration references did not have
the desired effect inasmuch as several arbitrators had wrongly and
arbitrarily awarded unconscionable amounts against the provisions of
agreements and without material on record, in collusion with the claimant
contractors and officials of the department, thereby causing heavy losses
to the State. As such, the State of Kerala considered it necessary, in
public interest, to cancel the arbitration clauses in the agreements
executed in terms of LCBS, to revoke the authority of the arbitrators
appointed thereunder and to enable the filing of appeals against the awards
or decrees already passed in certain arbitration references in respect of
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which the period of limitation had expired. As such, the State Act came
to be enacted with effect from 14th November 1997.
4. The State Act is a short Act and therefore, we deem it
appropriate to reproduce the same in its entirety as under:
"Kerala Revocation of Arbitration Clauses and Reopening
of Awards Act, 1998
Preamble ..............
...........
Section 1 - Short title, extent, commencement and
application
(1) This Act may be called the Kerala Revocation of Arbitration
Clauses and Reopening of Awards Act, 1998.
(2) It extends to the whole of the State of Kerala.
(3) It shall be deemed to have come into force on the 14th day of
November, 1997.
(4) It shall apply to all agreements executed in terms of the local
competitive bidding specification.
Section 2 - Definitions
(1) In this Act, unless the context otherwise requires,
(a) "agreement" means an agreement executed in terms of
the local competitive bidding specification for various works
of the Government of Kerala;
(b) "local competitive bidding specification" means the local
competitive bidding specification adopted by the Government
in their Order G.O. (Ms) No. 3/81/I&R dated the 20th January,
1981.
(2) Words and expressions used but not defined in this Act and
defined in
(a) the Arbitration Act, 1940 (Central Act 10 of 1940); or
(b) the Arbitration and Conciliation. Act, 1996 (Central Act 26
of 1996), in relation to arbitration proceedings commenced on
or after the 25th day of January, 1996,
THE SECRETARY TO GOVT. OF KERALA, IRRIGATION
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shall have the meanings, respectively, assigned to them in those
Acts.
Section 3 - Cancellation of arbitration clauses and
revocation of authority of arbitrator
(1) Notwithstanding anything contained in the Indian Contract Act,
1872 (Central Act 9 of 1872) or in the Arbitration Act, 1940 (Central
Act 10 of 1940) or in the Arbitration and Conciliation Act, 1996
(Central Act 26 of 1996) or in any other law for the time being in
force or in any judgement, decree or order of any court or other
authority or in any agreement or other instrument,
(i) the arbitration clauses in every agreement shall stand
cancelled;
(ii) the authority of an arbitrator appointed under an agreement
referred to in clause (i) shall stand revoked; and
(iii) any agreement referred to in clause (i) shall cease to have
effect in so far as it relates to the matters in dispute or difference
referred,
with effect on and from the date of commencement of this Act.
(2) Nothing in sub-section (1) shall be a bar for any party to a
agreement to file a suit in the court having jurisdiction in the matter
to which the agreement relates and all questions regarding the
validity or effect of the agreement between the parties to the
agreement or persons claiming under them and all matters in
dispute or difference between the parties to the agreement shall
be decided by the court, as if the arbitration clauses had never
been included in the agreement.
Section 4 - Period of limitation for filing suits
Notwithstanding anything contained in the Arbitration Act, 1940
(Central Act 10 of 1940) or in the Arbitration and Conciliation
Act, 1996 (Central Act 26 of 1996) or in the Limitation Act, 1963
(Central Act 36 of 1963), a suit under sub-section (2) of section 3
may be filed within six months from the date of commencement
of this Act or within such period as is allowed by the provisions of
the Limitation Act, 1963 (Central Act 36 of 1963), in relation to
such suits, whichever is later.
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Section 5 - Power of Government to file appeal against
certain awards
Notwithstanding anything contained in the Arbitration Act, 1940
(Central Act 10 of 1940) or in the Arbitration and Conciliation
Act, 1996 (Central Act 26 of 1996) or in the Limitation Act, 1963
(Central Act 36 of 1963) or in any other law for the time being in
force or in any judgement, decree or order of any court or other
authority or in any agreement or other instrument, where it appears
to the Government that any award passed is not in accordance
with the terms of the agreement or there was failure to produce
relevant data or other particulars before the Arbitrator before
passing the award or the award passed is of unconscionable
amounts, they may file appeal against such award within ninety
days of the date of commencement of this Act.
Section 6 - Procedure before court
For the removal of doubts, it is hereby clarified that the provisions
of the Code of Civil Procedure, 1908 (Central Act 5 of 1908),
shall apply to all proceedings before court and to all appeals under
this Act.
Section 7 - Arbitration Act not to apply
The provisions of this Act shall apply to any proceedings instituted
under this Act notwithstanding anything inconsistent herein with
the provisions of the Arbitration Act, 1940 (Central Act 10 of
1940) or the Arbitration and Conciliation Act, 1996 (Central Act
26 of 1996) or any other law for the time being in force.
Section 8 - Repeal and saving
(1) The Kerala Revocation of Arbitration Clauses and Reopening
of Awards Ordinance, 1998 (6 of 1998), is hereby repealed.
(2) Notwithstanding such repeal, anything done or deemed to have
been done or any action taken or deemed to have been taken
under the said Ordinance shall be deemed to have been done or
taken under this Act."
5. Section 3 of the State Act provides for "Cancellation of
arbitration clauses and revocation of authority of arbitrator". Sub-section
(1) of Section 3 of the State Act provides that notwithstanding anything
THE SECRETARY TO GOVT. OF KERALA, IRRIGATION
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contained in the Indian Contract Act, 1872 or in the Arbitration Act,
1940 (hereinafter referred to as "1940 Act") or in the Arbitration and
Conciliation Act, 1996 (hereinafter referred to as "1996 Act") or in any
other law for the time being in force or in any judgment, decree or order
of any court or other authority or in any agreement or other instrument,
the arbitration clauses in every agreement shall stand cancelled; the
authority of an arbitrator appointed under an agreement referred to in
clause (i) shall stand revoked; and any agreement referred to in clause
(i) shall cease to have effect insofar as it relates to the matters in dispute
or difference referred. The same shall be with effect on and from the
date of commencement of the State Act. Sub-section (2) of Section 3 of
the State Act provides that nothing provided in sub-section (1) of Section
3 of the State Act shall be a bar for any party to an agreement to file a
suit in the court having jurisdiction in the matter to which the agreement
relates and all questions regarding the validity or effect of the agreement
between the parties to the agreement or persons claiming under them
and all matters in dispute or difference between the parties to the
agreement shall be decided by the court, as if the arbitration clauses had
never been included in the agreement.
6. Section 4 of the State Act enables a party to file a suit under
sub-section (2) of Section 3 of the State Act within a period of six months
from the date of commencement of the State Act or within such period
as is allowed by the provisions of the Limitation Act, 1963 (hereinafter
referred to as "1963 Act"), in relation to such suits whichever is later.
This is notwithstanding anything contained in the 1940 Act or in the 1996
Act or in the 1963 Act.
7. Section 5 of the State Act enables the State Government to file
an appeal against any award within a period of 90 days from the date of
commencement of the State Act, where it appears to the State
Government that any award passed is not in accordance with the terms
of the agreement or there was failure to produce relevant data or other
particulars before the Arbitrator before passing the award or the award
passed is of unconscionable amounts. Again, this is notwithstanding
anything contained in the 1940 Act or in the 1996 Act or in the 1963 Act
or in any other law for the time being in force or in any judgment, decree
or order of any court or other authority or in any agreement or other
instrument.
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8. Section 6 of the State Act clarifies that the provisions of the
Code of Civil Procedure, 1908 (hereinafter referred to as "CPC") shall
apply to all proceedings before the court and to all appeals under the
State Act.
9. Section 7 of the State Act provides that the provisions of the
State Act shall apply to any proceedings instituted under the State Act
notwithstanding anything inconsistent therein with the provisions of the
1940 Act or the 1996 Act or any other law for the time being in force.
10. Sub-section (1) of Section 8 of the State Act repeals the Kerala
Revocation of Arbitration Clauses and Reopening of Awards Ordinance,
1998. Sub-section (2) of Section 8 of the State Act provides that
notwithstanding such repeal, anything done or deemed to have been
done or any action taken or deemed to have been taken under the said
Ordinance shall be deemed to have been done or taken under the State
Act.
11. Immediately after the enactment of the State Act, several
petitions came to be filed before the High Court of Kerala challenging
the validity thereof. By the impugned judgment, the High Court of Kerala
allowed the petitions and held and declared the State Act to be
unconstitutional, being beyond the legislative competence of the State
Legislature.
12. It will be relevant to note that the State Act was reserved for
the consideration of the President of India and had received his assent
as required under Article 254 (2) of the Constitution of India.
13. The reasons that weighed with the High Court of Kerala for
holding the State Act to be unconstitutional, are as under:
(i)
That the 1940 Act, Arbitration (Protocol and Convention)
Act, 1937 (hereinafter referred to as "1937 Act") and
the Foreign Awards (Recognition and Enforcement) Act,
1961 (hereinafter referred to as "1961 Act") had
become outdated. As such, the Parliament found it
expedient to make a law with respect to arbitration and
conciliation, taking into account the United Nations
Commission on International Trade Law (for short
"UNCITRAL") Model Law and Rules. The 1996 Act
was enacted with the clear intention of harmonizing
concepts on arbitration and conciliation of different legal
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systems of the world on the basis of UNCITRAL Model
Law and Rules. As such, the matters dealt with by the
1996 Act were not the matters merely falling under Entry
13 of List III of the Seventh Schedule to the Constitution
of India but also falling within Entries 10 to 14 of List I
of the Seventh Schedule to the Constitution of India;
(ii)
Since Entries 10 to 14 of List I of the Seventh Schedule
to the Constitution of India deal with foreign affairs,
relationship with foreign countries, United Nations
Organization, participation in international conferences,
associations and other bodies and implementing of
decisions made thereat, entering into treaties and
agreements and implementing of treaties, agreements
and conventions, the issue of applicability of Article 253
of the Constitution of India would arise. As such, the
Union Parliament had an overriding legislative power
to make any law for the whole or any part of the territory
of India.