2018 (12) TMI 2002 - SC - Indian Laws

Power of High Court to recall its order - Interpretation of arbitration clauses in the contract - Maintainability of the appeal under Section 37 of the Arbitration and Conciliation Act, 1996 - HELD THAT - Clause 22 deals with disputes that may arise under the agreement which can either be dealt with by an in-house procedure or by courts, as the case may be. By no stretch of imagination could this in-house procedure be stated to be an agreement to arbitrate between the parties. In any case, what is important on the facts of this case, is that neither of these clauses has been invoked. The Court's order dated 27.06.2017, clearly shows that Justice Kanade was appointed as Sole Arbitrator thanks to Mr. Agashe, Assistant Engineer, having no objection to the same. As has been stated in the recall application and the affidavit of the Commissioner, Mr. Agashe was not empowered to take any decision regarding appointment of an Arbitrator. This being the undisputed position before the Court, it is clear that an oral agreement between the parties de hors Clause 13 and Clause 22 could not have been arrived at. It is also reminded that this agreement was arrived at during the course of hearing of a Section 9 petition. In the present case, nobody has applied Under Section 11 to appoint an Arbitrator in accordance with either Clause 13 or Clause 22. It is clear that these constitutional courts, being courts of record, the jurisdiction to recall their own orders is inherent by virtue of the fact that they are superior courts of record. The impugned judgment of the Division Bench of the High Court is set aside. Shri Naphade urges to continue the order dated 23.06.2017 for a period of four weeks from today so that he may approach the appropriate forum - Appeal disposed off.

Summary

Issues Involved:
1. High Court's power to recall its orders.
2. Interpretation of arbitration clauses in the contract.
3. Maintainability of the appeal under Section 37 of the Arbitration and Conciliation Act, 1996.
4. Jurisdiction of High Courts as courts of record under Article 215 of the Constitution of India.

Issue-wise Detailed Analysis:

1. High Court's Power to Recall its Orders:
The Supreme Court addressed whether the High Court has the inherent power to recall its own orders. It was argued that High Courts, being courts of record under Article 215 of the Constitution of India, possess inherent jurisdiction to recall their orders to prevent miscarriage of justice or to correct grave errors. The judgment cited precedents such as *National Sewing Thread Co. Ltd. v. James Chadwick & Bros. Ltd.*, *Shivdev Singh and Ors. v. State of Punjab and Ors.*, and *M.M. Thomas v. State of Kerala and Anr.*, affirming that High Courts have plenary power to correct their records and orders.

2. Interpretation of Arbitration Clauses in the Contract:
The contract contained Clause 13 and Clause 22, which were debated as potential arbitration clauses. Clause 13 explicitly stated, "No Arbitration is allowed," and Clause 13.2 provided for in-house resolution by the Municipal Commissioner. Clause 22 dealt with the jurisdiction of courts and included an in-house procedure for dispute resolution. The Supreme Court concluded that neither clause constituted an arbitration agreement. The Court emphasized that the in-house procedures outlined could not be construed as arbitration agreements and that the appointment of Justice V.M. Kanade (retired) as an arbitrator was based on an oral agreement during a Section 9 petition, which was not valid as per the contract terms.

3. Maintainability of the Appeal Under Section 37 of the Arbitration and Conciliation Act, 1996:
The Division Bench of the High Court had allowed the appeal under Section 37 of the Act, reasoning that the Act did not provide for judicial intervention in the form of a review or recall of orders. The Supreme Court, however, held that since there was no arbitration agreement, the provisions of the Arbitration and Conciliation Act, 1996, including Section 5, which limits judicial intervention, were not applicable. Thus, the appeal under Section 37 was not maintainable.

4. Jurisdiction of High Courts as Courts of Record Under Article 215 of the Constitution of India:
The Supreme Court reiterated that High Courts, as courts of record under Article 215, have inherent powers to recall their orders. This inherent power is essential to correct errors and prevent injustice. The judgment underscored the High Court's duty to maintain accurate records and correct apparent errors in its orders, supporting the High Court's jurisdiction to recall its orders.

Conclusion:
The Supreme Court set aside the Division Bench's judgment, reaffirming the High Court's inherent power to recall its orders and clarifying that the clauses in question did not constitute arbitration agreements. The order dated 23.06.2017 was continued for four weeks to allow the respondent to approach the appropriate forum. The appeal was disposed of accordingly.