TPI INDIA LIMITED Vs. UNION OF INDIA

JUDGEMENT

(1.) in this writ petition petitioners are challenging the vires of Section 34 of the Arbitration and Conciliation Act, 1996 (for short "the Act"). Following factual matrix has led the petitioners to file the instant petition:

(2.) Respondent No.2 (for short "IFFCO") placed an order for 4.5 lakh bags in different specifications and prices, on the petitioners. The order envisaged that Delivery Orders would be issued specifying the quantity and destination and price on which the material is to be supplied. IFFCO placed three Delivery Orders for supply of total of 2.25 lakhs of Urea bags to Kalol Plant. Petitioners defaulted in supplying the bags. This compelled the IFFCO to go in for risk purchase by refuting the tender of 80 lakhs bags in respect of default by several suppliers which included petitioners. Thereafter, IFFCO issued notice calling upon petitioners to pay a sum of Rs.5.93 lakhs with interest. It had forfeited the earnest money deposit of the petitioners and the demand by legal notice as aforesaid, was for the amount after adjusting the earnest money deposit. Petitioners refuted liability to make any payment and on the other hand demanded refund of earnest money deposit. As dispute arose, IFFCO issued notice referring the issue to arbitration and called upon petitioners to concur to the appointment of named arbitrators. Petitioners refused to do so. IFFCO filed an application under Section 11 of the Arbitration and Conciliation Act, 1996 in this Court for appointment of Arbitrator. Order dated 28/08/1998 was passed in the said application appointing Mr. Justice P.K.Bahri (Retired) as the Sole Arbitrator. It may be mentioned at this stage that the Arbitrator was appointed as per the suggestion of the parties. Learned Arbitrator held the proceedings and gave Award dated 14/10/1999. As per this Award damages/compensation to the tune of Rs.3,69,600.00 along with interest at the rate of 18% P.A. and cost of Rs.50,000.00 has been awarded in favour of IFFCO. Petitioners, if were aggrieved by the Award, had the remedy to challenge the Award as per the provisions of Section 34 of the Act. For this petitioners were to file objections to the Award within a period of three months. However, petitioners did not choose to do so as the petitioners felt that Section 34 does not provide proper and adequate remedy to challenge the Award. Therefore, the petitioners filed the instant petition challenging the constitutionality of Section 34 of the Act.

(3.) The main thrust of the petition, on the basis of which Section 34 of the Act is challenged as ultravires and unconstitutional, is that it fails to provide even one forum of appeal. The contention is that the grounds as stipulated in Section 34 on which the Award can be challenged do not include a ground to challenge the Award on merits and are mainly jurisdictional grounds. According to the petitioners there has to be at least provision for one appeal to challenge the Award on merits and the courts should be entitled to review the Award judicially. The power of judicial review is a fundamental right and part of basic structure of the constitution. The Court should be equipped with power to consider whether the conclusion is based on evidence and record and whether it supports the finding or else the conclusion is based on no evidence and Award is to be set-aside. In the absence of any such power, the provisions of Section 34 should be treated as unconstitutional being violative of Article 14 of the Constitution. Counsel further tried to buttress this argument by submitting that in the instant case itself although learned Arbitrator had allowed the claim of the IFFCO only to the extent of Rs.3,69,600.00 an exorbitant amount has been awarded by way of cost of Rs.50,000.00 when there was not even a prayer made by the IFFCO for cost before the Arbitrator. According to the learned counsel such an Award could not be challenged on this ground within the four corners of Section 34 of the Act. Counsel for the petitioners, in support of aforesaid arguments relied upon following judgments relating to power of judicial review, necessity for provision of at least one appeal etc.: