This case is a part of our Annual Arbitration Review 2019.
Citation: (2019) SCC OnLine SC 1102
Court: Supreme Court of India
Coram: N.V. Ramana, Mohan M. Shantanagoudar, Ajay Rastogi, JJ.
Date: 27th August 2019
Keywords: Appointment of Arbitrators, National Highways Act, Section 11.
Overview and Ratio
The Supreme Court held that Highways Act, being a special law, has an overriding effect on the general law of arbitration and dismissed Section 11 application for appointment of the arbitrator.
Sayedabad Tea Estate was acquired by the Appellant, National Highways Authority of India for the purpose of construction of highways. The Appellant awarded the Respondent with compensation under the National Highways Act, 1956 (“NH Act”). Dissatisfied by the compensation determined by the competent authority under Sub-Section(1) of Section 3G of the NH Act, the Respondent filed an application for appointment of an arbitrator as per Section 3G(5), to the Central Government.
The Central Government did not respond within the requisite period of 30 days from receipt of the request, following which the respondent filed an application to the Chief Justice/ his designate for the appointment of an arbitrator invoking Section 11(1) of the Arbitration and Conciliation Act, 1996 (“1996 Act”). Following this, the Central Government appointed an arbitrator a few months after.
Meanwhile the Calcutta High Court ("HC") also appointed the sole arbitrator under Section 11 of the 1996 Act. The Respondent sent the letter of his recusal to the HC before the initiation of the proceedings. This stopped the arbitrator appointed by the central government to proceed, once the intervention by the Calcutta HC was made.
The Calcutta HC passed an order in favor of the Respondent taking note of the fact that the arbitrator had been appointed by the Central Government under Section 3G(5) of the NH Act, after the Respondent had moved an application to the Chief Justice of India, invoking his power under Section 11(6). The Court held that the right of appointment of the arbitrator by the Central Government stands forfeited as it failed to appoint the arbitrator until the filing of the application under Section 11(6) of the 1996 Act, before the Calcutta HC and therefore, the appointment of arbitrator during the pendency of proceedings, cannot be said to be a valid appointment.
Does the provision of appointment of arbitrators in the NH Act override the one present in the 1996 Act?
Section 11 Arbitration and Conciliation Act, 1996.
National Highways Act, 1956, Section 3G and H.
The Supreme Court observed that the usage of the term "subject to" in Section 3G (5) of the NH Act clearly indicates that the provisions of the NH Act will have an overriding effect vis-à-vis the 1996 Act in relation to land compensation matters arising under the NH Act.
The Supreme Court relied on the case of National Highways and Infrastructure Development Corporation Ltd. v. Prakash Chand Pradhan & Ors.[i] to say that the NH Act has been enacted under Entry 23 of the Union List of the 7th Schedule of the Constitution, that gives central government the ambit to govern matters related to the national highways. It is a special enactment which provides an inbuilt mechanism, not only in initiating acquisition until culmination of the proceedings in determining the compensation and its adjudication by the arbitrator to be appointed by the Central Government, but also by the court of law. Further, the Court assumed that the legislature intended the NH Act to be a complete code in itself, which eliminates the application of the Land Acquisition Act, 1894 as it contains the culmination of disbursement and settlement of disputes that is further strengthened under Section 3J of the Act.
The Supreme Court noted that Section 3G (6) of the NH Act clearly stipulated that the provisions of the 1996 Act would apply, subject to the provisions of the NH Act by the usage of the expression, “subject to”, which clearly indicates that the legislature intended to give an overriding effect to the provisions of the NH Act, wherein it relates to the disputes pertaining to determination of the amount of compensation of the Act. The conclusion that can be derived from reading the act is that the legislature in its wisdom intended to abrogate the power for appointment of an arbitrator under the provisions of the 1996 Act. It is also a well-settled principle of law that when a special law sets out a self-contained code, the application of a general law would impliedly be excluded.
The Court held that right of appointment of an arbitrator by the central government does not get forfeited within 30 days since there is no statutory limitation provided under Sub-Section (5) of Section 3G of the NH Act. This does not give an unguided discretion to the authority and in the absence of any statutory limitation, it must be within the reasonable time and if in fact the central government fails to discharge its statutory duty by failing to appoint an arbitrator on request of the party aggrieved. It will then be open to the party to invoke either the writ jurisdiction of the High Court under Article 226 of the constitution of India or the Civil Court.
As Section 3G (5) of the NH Act is a special enactment that gives the Central Government an exclusive power to appoint an arbitrator. The application filed under Section 11(6) of the Arbitration Act for appointment of an arbitrator is not maintainable and the provisions of the same can, therefore, not be invoked. The Supreme Court ordered the Central Government to appoint an arbitrator and quashed all orders passed by the Calcutta HC. The Court ordered the arbitrator so appointed by the Central Government to adjudicate and decided the dispute within a reasonable time.
[i] (2018) SCC OnLine SC 3245.