SOUTHERN STRUCTURALS LTD Vs. K S E BOARD

JUDGEMENT

(1.) This matter has been placed before us on a reference by a Division Bench of this Court doubting the correctness of the decision in Koshy Varghese v. Hindustan Paper Corporation, 2000 2 KerLT 329, wherein a Division Bench of this Court held that this Court sitting under Article 226 of the Constitution of India can direct the parties to go for arbitration under the Arbitration and Conciliation Act, 1996 even in the absence of any arbitration agreement between the parties.

(2.) Petitioner is a Company owned by the Government of Tamil Nadu which is engaged in the business of undertaking contracts in various parts of the country. Petitioner had undertaken a project for the Kerala State Electricity Board for erection of penstock, construction of anchors, etc. and it was alleged that a total sum of Rs. 1,51,44,306 was due to the Company from the Board for the construction of the project undertaken by them. Since the dispute is between the Company owned by the Government of Tamil Nadu as well as the statutory Board fully owned by the Government of Kerala, it was felt that the matter be amicably settled by a committee constituted by the parties. Since the Board did not take any step in that direction petitioner had to file O.P. No. 11781 of 2001 before this Court which was disposed of directing the Board to constitute a high level committee. Being a fully owned Company, Government of Kerala vide G.O. (Rt.) No. 230/2001/PD, dated 31.10.2001 constituted a committee of five members to resolve the issues between the parties. Petitioner had also written to the Board as per letter dated 19.12.2001 requesting to refer the dispute to the permanent Machinery of Arbitrators in the Bureau of Public Enterprises, Government of India. Request was rejected by the Board vide reply dated 20.2.2002 stating that there was no arbitration agreement between the parties and that the matter was pending before the Committee. Aggrieved by the said order petitioner has approached this Court seeking a Writ of Certiorari to quash Ext. P.5 letter of the Board refusing to refer the dispute to arbitration and also for a Writ of Mandamus directing the respondent-Board to agree for an arbitration and also for other consequential reliefs. When the matter came up before the learned Single Judge, learned Judge referred the matter to a Division Bench and the division Bench in turn referred the matter to a Larger Bench doubting the correctness of the Division Bench decision in Koshy Varghese's case, supra.

(3.) In Koshy Varghese's case dispute arose between Hindustan Paper Corporation Limited, a Government of India Undertaking and a private party in connection with the removal of waste from a soda recovery plant at Velloor. Writ Petition was preferred by one Koshy Varghese seeking a Writ of Mandamus directing the Corporation to refer the dispute to arbitration by a panel of arbitrators submitted by the petitioner or any other retired High Court Judge to be appointed by this Court. Petitioner therein also sought a direction to the Corporation to constitute a high power committee to consider the claims of the petitioner and also for referring the matter to arbitration. Corporation resisted the Petition stating that the request for reference to arbitration is misconceived and unsustainable in law since there was no arbitration clause in the contract between the parties. The Division Bench however placing reliance on the Office Memorandum dated 30.3.1989 took the view that since Government of India had taken a decision that inter se dispute between public sector enterprises should be resolved through arbitration so as to avoid unnecessary expenditure and to save time and energy and held that the same reasoning be extended to contracts between public sector enterprises and private individuals. The Bench also opined that since the Corporation had agreed to constitute a high power committee they had acquiesced in the position and there was valid and tenable claim for the petitioner for referring the matter to arbitration. The Bench further held as follows :