Supreme Court of India
EASTERN COALFIELDS LTD.versusSANJAY TRANSPORT AGENCY & ANR.
- Citation
- 2009 INSC 747
- Decided
- 6 May 2009
- Disposal
- Disposed off
- Bench
- MUKUNDAKAM SHARMA
Holding
The arbitration clause does not apply to disputes involving a private party, rendering the High Court’s appointment of an arbitrator under Section 11(6) of the Arbitration and Conciliation Act, 1996 improper and set aside.
Summary
Eastern Coalfields Ltd., a public sector undertaking, entered into an excavation contract with Sanjay Transport Agency, a private party. When a dispute arose, the contractor invoked Section 11(6) of the Arbitration and Conciliation Act, 1996, and the Calcutta High Court appointed an arbitrator. The employer appealed, arguing that Clause 14 of the contract limited arbitration to disputes between public sector enterprises inter se or between such enterprises and government departments, and therefore did not apply to a contract involving a private party. The Supreme Court held that the clause was inapplicable, making the High Court’s appointment of an arbitrator ultra vires. It set aside the appointment and directed that the parties may approach the civil courts, with the respondents entitled to the benefit of Section 14 of the Limitation Act, 1963.
Issues considered
- Whether an arbitration clause limited to disputes between public sector enterprises inter se and between public sector enterprises and government departments applies to a contract involving a private party.
- Whether Section 11(6) of the Arbitration and Conciliation Act, 1996 can be invoked to appoint an arbitrator when the arbitration clause is inapplicable.
- Whether the heading or marginal note of a statutory provision can be used for interpretation of that provision.
- Whether the parties may approach civil courts and claim the benefit of Section 14 of the Limitation Act, 1963.
Legislation cited
Subjects
arbitrationarbitration clausepublic sector enterpriseprivate partyinterpretation of statutessection headingmarginal noteLimitation Actcivil court jurisdictioncommercial contract
Judgment
,.
L
...
(2009) 9 S.C.R. 690
A EASTERN COALFIELDS LTD.
v.
SANJAY TRANSPORT AGENCY & ANR.
(Civil Appeal No. 753 of 2007)
MAY 6, 2009
8
[DR. MUKUNDAKAM SHARMA AND DR. B.S.
)
CHAUHAN, JJ.]
Arbitration and Conciliation Act, 1996:
'
c
s. 11 (6) - Appointment of arbitrator- HELD: The relevant
clause :in the agreement between the parties related to
disputes between Public Sector Enterprises inter se and
Public Sector Enterprises and Government Departments, and
D has no application in the instant case wherein one party is a
private party- Appointment made by the High Court set aside ~
- Claimant would be at liberty to approach the civil court -
Limitation Act, 1963 - s. 14 - Interpretation of Statutes.
Interpretation of Statutes:
E
Interpretation of provision of a statute - Relevance of.
section heading/marginal note - HELD: The rule of
interpretation that section heading or marginal note can be \-
relied upon to clear any doubt or ambiguity while interpreting
F any statutory provision can be applied to understand clauses
of arbitration agreement also which is in the realm of
commercial contract.
An excavation contract was entered into between the
appellant (employer), a Public Sector Undertaking, and (
G the respondent-contractor, a private party. When dispute
arose between the parties, the contractor filed an
application u/s 11 (6) of the Arbitration and conciliation
Act, 1996 before the High Court, which appointed an
arbitrator. Aggrieved, the employer filed the appeal.
H 690
EASTERN COALFIELDS LTD. v. SANJAY TRANSPORT 691
... AGENCY
Disposing of the appeal, the Court A
HELD: 1.1. Clause 14 of the agreement relying
whereupon the respondents filed the application u/s 11 (6)
of the Arbitration and conciliation Actl 1996, relates to
disputes of commercial nature between Public Sector
Enterprises inter se and between Public Sector B
Enterprises and Government Departments. The said
(
clause will have no application to an agreement which is
entered into between the appellant and the respondent,
one of whom is a private party. Since the arbitration
clause of the agreement is not applicable to the case in c
hand, therefore, the appointment of the arbitrator by the
High Court exercising jurisdiction u/s 11 (6) of the Act was
improper. [Para 4] [693-G-H; 694-A-B]
·1.2. It is well settled rule of interpretation that the D
section heading or marginal note can be relied upon to
clear any doubt or ambiguity in the interpretation of any
provision and to discern the legislative intent. The· said
interpretation can well be applied to understand and
construct the various clauses of an arbitration agreement E
also, which is in the realm of commercial contract. While
interpreting so, the Court may depend not only· on the
text but context as well in order to fully comprehend the
meaning of the clause of the contract. [Para 5] [694-C-E]
1.3. The order of the High Court is set aside. It would F
be open to the respondents, to approach the civil court
for adjudication of the disputes and for this purpose they
would be entitled to the benefit of s. 14 of the limitation
Act, 1963. [Para 6] [694-F-G]
) G
CIVIL APPELLATE JURISDICATION : Civil Appeal No.
753 of 2007.
From the Judgment & Order dated 19.01.2006 of the High
Court of Calcutta in A.P. No. 8 of 2003.
H
EASTERN COALFIELDS LTD. v. SANJAY TRANSPORT 693
..._, AGENCY [DR. MUKUNDAKAM SHARMA, J.]
t
regard to the commercial disputes between the Public Sector A
Enterprises inter se and Public Sector Enterprises and
Government Departments." It reads as follows:
"ARBITRATION WITH REGARD TO THE COMMERCIAL
DISPUTES BETWEEN THE PUBLIC SECTOR
ENTERPRISES INTER SE AND BETWEEN THE PUBLIC B
SECTOR ENTERPRISES AND GOVERNMENT
DEPARTMENTS."
"In the event of any dispute of difference relating to the
interpretation and application of the provisions of the C
commercial terms of the contract such dispute or difference
shall be referred by either party to the arbitration, to one of
the arbitrators in the Department of Public Enterprises, to
be nominated by the Secretary to the Government of India
incharge of the BUREAU OF PUBLIC ENTERPRISES.
The Arbitration Act, 1940 shall not be applicable to the D
arbitration under this clause. The award of the arbitrator
shall be binding upon the parties to the dispute, provided
however, any party aggrieved by such award, may make
further reference for setting aside or revision of the award
to the Law Secretary, Department of Legal Affairs, Ministry E
of Law & Justice, Government of India. Upon such
reference, the dispute shall be decided by the Law
Secretary or the Special Secretary/Additional Secretary
when so authorised by the Law Secretary, whose decision
shall bind the parties finally and conclusively. The parties F
to the dispute will share equally the cost of arbitration, as
intimated by the arbitrator. n
4. The aforesaid clause No. 14 relates to disputes of
commercial nature arising between the Public Sector
> Enterprises inter se and between the Public Sector Enterprises G
and Government Departments. The text that follows also makes
the said position clear which provides that after the award is
given by the arbitrator in the department of public sector
enterprises, reference for setting aside or revision of the award
H
694 SUPREME COURT REPORTS [2009] 9 S.C.R.
\
/
A is to be made to the Law Secretary, Department of Legal ~
~
Affairs, Ministry of Law & Justice, Government of India. The said
clause, therefore, concerns the commercial disputes arising
between the Public Sector Enterprises inter se and between
such enterprises and Government Departments. The said
e clause will have no application to an agreement which is
entered into between the appellant and the respondents, one
of whom is a private party. Since that arbitration clause is not
::'
applicable to the case in hand, therefore, the appointment of
the arbitrator by the Calcutta High Court exercising jurisdiction
c under Section 11(6) of the Act was improper.
5. It is well settled rule of interpretation that the section
heading or marginal note can be relied upon to clear any doubt
or ambiguity in the interpretation of any provision and to discern
the legislative intent. The section heading constitutes an
- '
D important part of the Act itself, and may be read not only as
explaining the provisions of the.,, section, but it also affords a -f
better key to the constructions of the provisions of the section
which follows than might be afforded by a mere preamble. The
said interpretation can well be applied to understand and
E construct the various clauses of an arbitration agreement also,
which is in the realm of commercial contract. While interpreting
so, the Court may not depend only on the text but context as
well in order to fully comprehend the context and the meaning
of the clause.
.... j
F 6. We, accordingly, set aside the said order and give liberty
to the respondents to approach the Civil Court for adjudication
and resolving the disputes and lis between the parties arising
out of the said contract. Needless to say that the respondents
herein will be entitled to get the benefit of Section 14 of the
G Limitation Act. t ...,
7. Accordingly, the appeal stands disposed of the
aforesaid extent.
R.P. Appeal disposed of.
H
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