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TMI Blog2022 (6) TMI 97X X X X Extracts X X X X X X X X Extracts X X X X ..... rrent List, the State can also make a law with regard to the same. The only requirement is that to validate such a law, it is necessary to reserve the same for consideration of the President of India and obtain his assent. When such an assent is obtained, the provisions of the State Law or Act so enacted would prevail in the State concerned, notwithstanding its repugnancy with an earlier Parliamentary enactment made on the subject. It is not in dispute that in the present case also, the State Act was reserved for consideration of the President of India and the assent of the President of India has been obtained. As such, the State Act so enacted would prevail in the State of Kerala - It will further be pertinent to note that in the case of MP Rural 2012, the M.P. Madhyastham Adhikaran Adhiniyam, 1983 (State enactment) provided for mandatory statutory arbitration in the State of M.P. irrespective of the arbitration agreement in respect of works contracts in the State of M.P. or its instrumentalities. This Court, in the cases of G.C. KANUNGO VERSUS STATE OF ORISSA [ 1995 (5) TMI 264 - SUPREME COURT] and MP Rural 2018, has specifically held that the 1940 Act, the 1996 Act and the State ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... encroachment upon the judicial powers of the State exercisable by the courts under the Constitution of India. The Court goes on to hold that the awards made under the 1984 Amendment Act by the Special Arbitration Tribunals are sought to be nullified by the 1991 Amendment Act. As such, the legislative power of the State Legislature is used by enacting the impugned 1991 Amendment Act to nullify or abrogate the awards of the Special Arbitration Tribunals by abrogating to itself a judicial power - the Court goes on to hold that the awards passed by the Special Arbitration Tribunals are the awards passed by the Tribunals exercising the judicial power and as such, when the State nullifies such awards, it abrogates to itself a judicial power and the Statute which annuls it, is unconstitutional being encroachment on the judicial power of the State. The perusal of the scheme of the 1940 Act would itself reveal that the passing of the judgment and decree under Section 17 of the 1940 Act is not a mere formality. The judgment can be pronounced only when the court is satisfied that no cause is made out for remitting the award or setting aside the award. The court is also entitled to remit or mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the awards which have become Rules of Court , is a transgression on the judicial functions of the State and therefore, violative of doctrine of separation of powers . As such, the State Act is liable to be declared unconstitutional on this count - what has been done by the State Act, is annulling the awards and the judgments and decrees passed by the court vide which the awards were made Rule of Court . As such, the rights which accrued to the parties much prior to the enactment of the State Act have been sought to be taken away by it. It is thus concluded in summary as follows: (i) That the State Act in pith and substance is referable to Entry 13 of List III of the Seventh Schedule to the Constitution of India and not to the Entries 12, 13, 14 and 37 of List I of the Seventh Schedule nor to Article 253 of the Constitution of India. The State Act, therefore, is within the legislative competence of the State Legislature. In any case, in view of the Presidential assent under Article 254(2) of the Constitution of India, the State Act would prevail within the State of Kerala. The finding of the High Court of Kerala, to the contrary, is erroneous in law; (ii) That the finding in the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9th July 2013 delivered in O.P. No.4206 of 1998 and companion matters, has held the State Act to be beyond the legislative competence of the Kerala State Legislature and as such, held the same to be unconstitutional. The High Court has also held that the State Act had an effect of annulling the awards of the arbitrators and the judgments and decrees passed by the courts. It was therefore held that the State Act encroaches upon the judicial power of the State. Being aggrieved thereby, the State of Kerala has approached this Court by filing various appeals. 3. The State of Kerala had started the construction of Kallada Irrigation Project (hereinafter referred to the "said Project") in the year 1961. The said project was proposed to be executed with the financial assistance from the International Bank for Reconstruction and Development (for short "World Bank") from June 1982 to March 1989. As required by the World Bank, a special condition namely, the Local Competitive Bidding Specification (hereinafter referred to as "LCBS") as envisaged by the World Bank Authorities was included in the agreements relating to the works connected with the said Project. Clauses 51 and 52 of the LCBS ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion and Conciliation. Act,1996 (Central Act 26 of 1996), in relation to arbitration proceedings commenced on or after the 25th day of January, 1996, shall have the meanings, respectively, assigned to them in those Acts. Section 3 Cancellation of arbitration clauses and revocation of authority of arbitrator (1) Notwithstanding anything contained in theIndian Contract Act, 1872 (Central Act 9 of 1872) or in the Arbitration Act, 1940 (Central Act 10 of 1940) or in the Arbitration and Conciliation Act, 1996 (Central Act 26 of 1996) or in any other law for the time being in force or in any judgement, decree or order of any court or other authority or in any agreement or other instrument, (i) the arbitration clauses in every agreement shall stand cancelled; (ii) the authority of an arbitrator appointed under an agreement referred to in clause (i) shall stand revoked; and (iii) any agreement referred to in clause (i) shall cease to have effect in so far as it relates to the matters in dispute or difference referred, with effect on and from the date of commencement of this Act. (2) Nothing in subsection (1) shall be a bar for anyparty to a agreement to fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... being in force. Section 8 Repeal and saving (1) The Kerala Revocation of Arbitration Clauses andReopening of Awards Ordinance, 1998 (6 of 1998), is hereby repealed. (2) Notwithstanding such repeal, anything done ordeemed to have been done or any action taken or deemed to have been taken under the said Ordinance shall be deemed to have been done or taken under this Act." 5. Section 3 of the State Act provides for "Cancellation of arbitration clauses and revocation of authority of arbitrator". Subsection (1) of Section 3 of the State Act provides that notwithstanding anything contained in the Indian Contract Act, 1872 or in the Arbitration Act, 1940 (hereinafter referred to as "1940 Act") or in the Arbitration and Conciliation Act, 1996 (hereinafter referred to as "1996 Act") or in any other law for the time being in force or in any judgment, decree or order of any court or other authority or in any agreement or other instrument, the arbitration clauses in every agreement shall stand cancelled; the authority of an arbitrator appointed under an agreement referred to in clause (i) shall stand revoked; and any agreement referred to in clause (i) shall cease to have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the time being in force. 10. Subsection (1) of Section 8 of the State Act repeals the Kerala Revocation of Arbitration Clauses and Reopening of Awards Ordinance, 1998. Subsection (2) of Section 8 of the State Act provides that notwithstanding such repeal, anything done or deemed to have been done or any action taken or deemed to have been taken under the said Ordinance shall be deemed to have been done or taken under the State Act. 11. Immediately after the enactment of the State Act, several petitions came to be filed before the High Court of Kerala challenging the validity thereof. By the impugned judgment, the High Court of Kerala allowed the petitions and held and declared the State Act to be unconstitutional, being beyond the legislative competence of the State Legislature. 12. It will be relevant to note that the State Act was reserved for the consideration of the President of India and had received his assent as required under Article 254 (2) of the Constitution of India. 13. The reasons that weighed with the High Court of Kerala for holding the State Act to be unconstitutional, are as under: (i) That the 1940 Act, Arbitration (Protocol and Convention) Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also, Entries 10 and 14 of List I of the Seventh Schedule to the Constitution of India. Entry 37 in List I of the Seventh Schedule to the Constitution of India deals with foreign loans. That Article 292 of the Constitution of India specifically deals with the borrowing by the Government of India. That the assistance provided by the World Bank also primarily falls within the executive power of the Union referable to Article 73 (1)(b) of the Constitution of India and as such, the State Act was beyond the legislative competence of the State Legislature; (v) That the proceedings which were made subject matter of the State Act, could have been dealt with only within the Judicial power of the State through the courts in terms of the provisions of the 1940 Act and 1996 Act. As such, the impugned legislation was an encroachment into the Judicial power of the State which was exercised through the courts in terms of the laws already made and in force. It infracts the quality doctrine and the avowed constitutional principles insulating the Judicial function which is cardinal to deliverance of justice as part of the seminal constitutional values, including separation of powers; and (vi) T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the legislative competence of the State Legislature can only be circumscribed by the express prohibition contained in the Constitution of India itself. It is submitted that unless and until there is any provision in the Constitution of India expressly prohibiting legislation on the subject either absolutely or conditionally, there can be no fetter or limitation on the plenary power which the State Legislature enjoys to legislate on the topic enumerated in Lists II and III of the Seventh Schedule to the Constitution of India. In support of this proposition, he relies on the judgment of this Court in the case of Maharaj Umeg Singh and Others v. State of Bombay and Others [1955] 2 SCR 164]. 18. Shri Gupta further submitted that there is no repugnancy between the 1996 Act and the State Act. He submitted that the 1996 Act would apply where there is an arbitration clause in the agreement. If there is no arbitration clause in the agreement, the 1996 Act would not apply. He submitted that the 1996 Act itself is a legislation enacted with reference to Entry 13 of List III of the Seventh Schedule to the Constitution of India. In support of this proposition, he relies on the judgments ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o Article 253 of the Constitution of India. He submitted that the UNCITRAL Model Law which was adopted by the General Assembly of the United Nations, recommended that all the countries give due consideration to it while enacting the laws governing international commercial arbitration practices. He submitted that, in any case, the Model Law is neither a treaty nor an agreement, convention, decision within the meaning of Article 253 of the Constitution of India or for that matter Entries 13 and 14 of List I of the Seventh Schedule to the Constitution of India. He submitted that following the principle of ejusdem generis, the word 'decision' will have to be construed as one which will mean a binding obligation on the States. In this respect, he relies on the judgment of this Court in the case of Kavalappara Kottarathil Kochuni @ Moopil Nayar v. States of Madras and Kerala and Others [[1960] 3 SCR 887]. 22. Shri Gupta also relies on the rule of construction known as Noscitur a sociis, that is, the meaning of a word is to be judged by the company it keeps. In this respect, he relies on the judgment of this Court in the case of M.K. Ranganathan v. Government of Madras and Others [1955] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urther submitted that after the Presidential assent was received under Article 254 (2) of the Constitution of India, the test to be applied to the State Law to be held repugnant to Central Law is that "there is no room or possibility for both Acts to apply". He submitted that no such repugnancy has been pointed out by the respondents in the State Act visàvis the 1940 Act and 1996 Act. In this respect, he relies on the judgment of this Court in the case of Rajiv Sarin and Another v. State of Uttarakhand and Others [(2011) 8 SCC 708]. 28. Shri Shishodia as well as Shri Gupta submitted that merely because some part of the said Project is financed by the World Bank, it cannot be a ground to invalidate the State Act which is referable to Entry 13 of List III of the Seventh Schedule to the Constitution of India. • SUBMISSIONS ON BEHALF OF THE RESPONDENTS: 29. Per contra, Shri Venugopal, learned Senior Counsel appearing on behalf of some of the respondents submitted that the State Act is wholly arbitrary and violative of Article 14 of the Constitution of India. He submitted that the State Act arbitrarily singles out the said Project started in the year 1961 out of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for giving effect to the decisions taken at the international conference, which are not binding in nature. 32. Shri Venugopal submitted that a law passed under Article 253 of the Constitution of India would denude the State Legislature of its competence to make any law on the same subject matter regardless of whether the subject matter falls in List II or List III. He therefore submitted that since the 1996 Act has been enacted by the Parliament in exercise of Legislative power under Article 253 of the Constitution of India, the State Legislature would not have the power to make a law which is repugnant thereto, even with regard to subjects falling in List II or List III. A reference is again made to the judgment of this Court in the case of Maganbhai Ishwarbhai Patel (supra). In this regard, the learned Senior Counsel also relies on the judgments of this Court in the cases of Mantri Techzone Private Limited v. Forward Foundation and Others [(2019) 18 SCC 494], State of Bihar and Others v. Bihar Chamber of Commerce and Others [(1996) 9 SCC 136] and Jayant Verma and Others v. Union of India and Others [(2018) 4 SCC 743]. 33. Shri Venugopal further submitted that the State Act is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contract is violative of the fundamental principle of justice. It is submitted that what has been sought to be done by the State Act is unilateral addition or alteration of the contract and foisting the same on unwilling parties. It is submitted that the same would not be permissible. Reliance in this respect is placed on the judgment of this Court in the case of Ssangyong Engineering and Construction Company Limited v. National Highways Authority of India (NHAI) [(2019) 15 SCC 131]. 39. Shri Sen further submitted that the impugned legislation encroaches upon the judicial power and judicial functions and in turn, amounts to infringement of the basic structure of the Constitution of India. Reliance in this respect is placed on the judgment of this Court in the case of SREI Infrastructure Finance Limited v. Tuff Drilling Private Limited [(2018) 11 SCC 470]. He further submitted that the judgment of this Court in the case of G.C. Kanungo (supra), rather than supporting the case of the appellants, would support the case of the respondents. 40. Shri Sen, relying on the judgment of this Court in the case of S. Jagannath (supra), would submit that the 1996 Act is referable to Article 25 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitted that the legislature does not have the competence to enact a legislation which sets aside the judgment or an award passed by a court. 45. Shri John Mathew, learned counsel appearing on behalf of some of the respondents submitted that the State Act is discriminatory in nature. He submitted that the State, out of 343 cases, has chosen to file an appeal only insofar as 55 claims/cases are concerned. He also submitted that the State Act has sought to alter the rights and remedies in the contracts executed with the State nearly a decade before the State Act was brought into effect. He submitted that certain claimants are being denied the equal treatment as is available to large number of similarly situated claimants who are getting benefits under the 1996 Act. 46. Shri Mathew submitted that if the legislative power is exercised by the State Legislature in transgression of Constitutional limitations with respect to Article 13(2) of the Constitution of India which prohibits the State from making any law which takes away or abridges the rights conferred by PartIII of the Constitution of India, such an exercise of power would be invalid in law. In this regard, he relies on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and public interest have to march hand in hand. He submitted that the State Act derogates from the principle of speedy settlement of disputes in an arbitrary and selective manner and therefore, is not valid being contrary to public interest. 51. Shri Roy Abraham, learned counsel appearing on behalf of some of the respondents also made submissions which are on similar lines as are made by other counsel for respondents. • SUBMISSIONS ON BEHALF OF THE APPELLANTS IN REJOINDER: 52. Shri Gupta, learned Senior Counsel, in rejoinder, submitted that the reliance placed by the respondents on the judgment of this Court in the case of Kesoram Industries Ltd. (supra) is misplaced inasmuch as the paragraphs which are relied on by the respondents are from the minority judgment. He submitted that, on the contrary, the majority judgment upholds the validity of the State Legislation. He submitted that insofar as the reliance placed by the respondents on the judgments of this Court in the cases of S. Jagannath (supra) and Mantri Techzone Private Limited (supra) are concerned, the same nowhere held that the State Legislature would be denuded of the field altogether, beyond what the treaty and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v. Vithal Rao and Others [(1973) 1 SCC 500] and State of Kerala and Others v. T.M. Peter and Others [(1980) 3 SCC 554]. He further submitted that Section 5 of the State Act itself provides sufficient guidelines regarding the cases in which the State would be empowered to file an appeal. As such, it cannot be said that the power given to the State to file an appeal is unguided. 56. Shri Gupta concluded by submitting that the argument that the State Act interferes with the judicial power of the State is also devoid of any substance. The State Act merely provides for an appeal against the decree which will be tested in the appeal and as such, the final word still remains with the judiciary. He therefore submitted that all the contentions raised on behalf of the respondents are without merit. • CONSIDERATION: * LEGISLATIVE COMPETENCE OF THE STATE LEGISLATURE TO ENACT THE STATE LAW: 57. We first propose to consider the question as to whether the State Act is within the legislative competence of the State Legislature as contended by the appellants or as to whether it is beyond the legislative competence of the State Legislature as contended by the respondents. For that, the que ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure. When there is already the legislation of Parliament made on this subject, it operates in respect of all States in India, if not excepted. Since it is open to a State Legislature also to legislate on the same subject of arbitration, in that, it lies within its field of legislation falling in an entry in the Concurrent List and when a particular State Legislature has made a law or Act on that subject for making it applicable to its State, all that becomes necessary to validate such law is to obtain the assent of the President by reserving it for his consideration. When such assent is obtained, the provisions of the State Law or Act so enacted prevails in the State concerned, notwithstanding its repugnancy to an earlier Parliamentary enactment made on the subject. It was not disputed that insofar as the 1991 Amendment is concerned, it has been assented to by the President of India after it was reserved for his consideration. Hence, the Orissa State Legislature's enactment, the 1991 Amendment Act is that made on a subject within its legislative field and when assent of the President is obtained for it after reserving it for his consideration it becomes applicable to the State ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arbitration. 39. The M.P. Act of 1983 was made when the previous Arbitration Act of 1940 was in the field. That Act of 1940 was a Central law. Both the Acts operated in view of Section 46 of the 1940 Act. The M.P. Act, 1983 was reserved for the assent of the President and admittedly received the same on 17101983 which was published in the Madhya Pradesh Gazette Extraordinary dated 12101983. Therefore, the requirement of Article 254(2) of the Constitution was satisfied. Thus, the M.P. Act of 1983 prevails in the State of Madhya Pradesh. Thereafter, the AC Act, 1996 was enacted by Parliament repealing the earlier laws of arbitration of 1940. It has also been noted that the AC Act, 1996 saves the provisions of the M.P. Act, 1983 under Sections 2(4) and 2(5) thereof. Therefore, there cannot be any repugnancy. (See the judgment of this Court in T. Barai v. Henry Ah Hoe [(1983) 1 SCC 177 : 1983 SCC (Cri) 143 : AIR 1983 SC 150] .) 40. In this connection the observations made by the Constitution Bench of this Court in M. Karunanidhi v. Union of India [(1979) 3 SCC 431 : 1979 SCC (Cri) 691] are very pertinent and the following observations are excerpted: (SCC p. 450, para ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate with respect to one of the matters enumerated in the Concurrent List contains any provision repugnant to the provisions of an earlier law made by Parliament or an existing law with respect to that matter, then, the law so made by the Legislature of such State shall, if it has been reserved for the consideration of the President and has received his assent, prevail in that State:" (emphasis supplied) 48. The basic ingredients for the application of Article 254(2) can be noted thus: (i) A law made by the legislature of theState (the 2019 Act in this case); (ii) Such law is made on a subjectfalling in the concurrent list (Entry42 of the Concurrent List in this case); (iii) Such law is repugnant to theprovisions of an earlier/existing law made by the Parliament (the 2013 Act in this case); and (iv) The State law is reserved for theassent of the President and has received the same. 49. Upon fulfilment of the above conditions, such State law would prevail in the State despite there being a law made by the Parliament on the same subject and despite being repugnant thereto. The most peculiar feature of Article 254(2) is the recognition of existence of repugnancy betwe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lying with the requirements of Article 254(2), the Court is left with nothing to achieve by identifying repugnancy between the laws because the same has already been identified, accepted and validated as per the sanction of the Constitution under Article 254(2). To indulge in such an exercise would be intuitive. Moreover, the Court ought not to nullify a law made in compliance with Article 254(2) on the sole ground of repugnancy. For, repugnancy, in such cases, is said to have been constitutionalized. To put it differently, the very purpose of engaging in the exercise, in terms of clause (2) of Article 254, presupposes existence of repugnancy and is intended to overcome such repugnancy. Therefore, the endeavour of the petitioners in the present matter to highlight repugnancy, is misdirected, flimsy and inconsequential." 68. As such, once the State Act was reserved for consideration and received the assent of the President of India, it would prevail. Once that is the position, any endeavour to find out any repugnancy between the two, would be futile. No doubt, that it is sought to be urged on behalf of the appellants that there is no repugnancy between the State Act and the Central ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s what is called the residuary power vesting in Parliament. The principles have been succinctly summarised and restated by a Bench of three learned Judges of this Court on a review of the available decision in Hoechst Pharmaceuticals Ltd. v. State of Bihar [(1983) 4 SCC 45 : 1983 SCC (Tax) 248]. They are: (1) The various entries in the three listsare not "powers" of legislation but "fields" of legislation. The Constitution effects a complete separation of the taxing power of the Union and of the States under Article 246. There is no overlapping anywhere in the taxing power and the Constitution gives independent sources of taxation to the Union and the States. (2) In spite of the fields of legislationhaving been demarcated, the question of repugnancy between law made by Parliament and a law made by the State Legislature may arise only in cases when both the legislations occupy the same field with respect to one of the matters enumerated in the Concurrent List and a direct conflict is seen. If there is a repugnancy due to overlapping found between List II on the one hand and List I and List III on the other, the State law will be ultra vires and shall have to give way to the Unio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . There the doctrine of pith and substance is to be applied and if the impugned legislation substantially falls within the power expressly conferred upon the legislature which enacted it, an incidental encroaching in the field assigned to another legislature is to be ignored. While reading the three lists, List I has priority over Lists III and II and List III has priority over List II. However, still, the predominance of the Union List would not prevent the State Legislature from dealing with any matter within List II though it may incidentally affect any item in List I. (emphasis supplied) 71. It could thus be seen that the Constitution Bench has held that when the legislative competence of a State Legislature is questioned on the ground that it encroaches upon the legislative competence of the Parliament, since some entries are bound to be overlapping, in such a situation, the doctrine of pith and substance has to be applied to determine as to which entry does a given piece of legislation relate to. Once it is so determined, any incidental trenching on the field reserved to the other legislature is of no consequence. The court has to look at the substance of the matter. The tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quired to keep Article 51 in mind. 239. Article 253 of the Constitution provides that while giving effect to an international treaty, Parliament assumes the role of the State Legislature and once the same is done the power of the State is denuded. …………. 293. Parliament in enacting the Tea Act has exercised its superior power in the matter in terms of Article 253 of the Constitution of India. Such superior power in certain situations can also be exercised in terms of Entry 33 List III as also overriding powers of Parliament during national emergency including those under Articles 249, 250, 251 and 252 of the Constitution of India. (See ITC Ltd. [(2002) 9 SCC 232])" 74. It is to be noted that the aforesaid paragraphs are from the minority view expressed by Sinha, J. As such, the view expressed by the learned Judge, contrary to the majority judgment in the Constitution Bench, would not support the case of the respondents any further. * UNCITRAL MODEL LAW A DECISION OR RECOMMENDATION? : 75. That leaves us to consider the contention on behalf of the respondents that the 1996 Act is enacted by the Parliament under Article 253 of the Constitutio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd Rules. …………" 78. A perusal thereof would clearly reveal that the General Assembly of the United Nations has recommended that all countries give due consideration to the UNCITRAL Model Law, in view of the desirability of uniformity of the law of arbitral procedures and the specific needs of international commercial arbitration practices are concerned. 79. It could thus be seen that there is no binding decision at the General Assembly of the United Nations to implement the UNCITRAL Model Law. In any case, that recommendation is with regard to only international commercial arbitration practices. No doubt that the Parliament, with certain modifications, has given due consideration to the UNCITRAL Model Law for legislation on the domestic arbitration. However, that cannot by itself be said to be binding on the Parliament to enact the law in accordance with UNCITRAL Model Law. 80. It will also be relevant to refer to the Resolution dated 11th December 1985 passed by the United Nations General Assembly, which reads thus: "40/72. Model Law on International Commercial Arbitration of the United Nations Commission on International Trade Law The General ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith a question which has incidentally come up for our consideration. Under para 2 of the CRZ Notification, the activities listed thereunder are declared as prohibited activities. Various State Governments have enacted coastal aquaculture legislations regulating the industries set up in the coastal areas. It was argued before us that certain provisions of the State legislations including that of the State of Tamil Nadu are not in consonance with the CRZ Notification issued by the Government of India under Section 3(3) of the Act. Assuming that be so, we are of the view that the Act being a Central legislation has the overriding effect. The Act (the Environment Protection Act, 1986) has been enacted under Entry 13 of List I Schedule VII of the Constitution of India. The said entry is as under: "Participation in international conferences, assessment and other bodies and implementing of decisions made thereat." The preamble to the Act clearly states that it was enacted to implement the decisions taken at the United Nations' Conference on the Human Environment held at Stockholm in June 1972. Parliament has enacted the Act under Entry 13 of List I Schedule VII read with Article 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... redress and remedy, and to develop national laws regarding liability and compensation for the victims of pollution and other environment damage. It further observes that it is considered expedient to implement the decision taken at the aforesaid conferences. 85. It is thus clear that whereas, the 1986 Act and the NGT Act have been enacted specifically to implement the decisions taken at the international conferences, the 1996 Act is enacted on the basis of the Resolution passed by the General Assembly of the United Nations in 1985, whereby the General Assembly only recommended the adoption of UNCITRAL Model Law insofar as international commercial arbitration practices are concerned. As such, the 1986 Act and the NGT Act are directly referable to Entry 13 of List I of the Seventh Schedule and Article 253 of the Constitution of India. Therefore, reliance on the above referred judgments, in our view, would not be of any assistance to the case of the respondents, inasmuch as the Resolution of the General Assembly of the United Nations is only recommendatory in nature and there is no binding decision taken thereat. * STATE LEGISLATURE'S ENCROACHMENT ON JUDICIAL POWERS: 86. We next c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enforcement of its own judgments and decrees. The mere fact that such judgments or decrees of courts by which the awards of Special Arbitration Tribunals are made "Rules of Court" or are affirmed by judgments and decrees of superior courts in appeals, revisions or the like, cannot make the awards the decisions of courts. Hence, when the awards of Special Arbitration Tribunals are made by the judgments and decrees of court, "Rules of Court" for enforcing them through its execution process, they (the awards) do not merge in the judgments and decrees of courts, as would make them the decisions of court. The legal position as to nonmerger of awards in judgments and decrees of courts, which we have stated, receives support from certain observations in the decision of this Court in Satish Kumar v. Surinder Kumar [(1969) 2 SCR 244 : AIR 1970 SC 833] . There, this Court was confronted with the question, whether an award made by an arbitrator which had become unenforceable for want of registration under the Registration Act, ceased to be a decision of the arbitrator, which binds the parties or their privies. In that context, this Court observed that an award is entitled to that respec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... where they render judgments and decrees to make the awards of the Special Arbitration Tribunals "Rules of Court" so that they could be made enforceable through the machinery of courts. Thus, the awards of the Special Arbitration Tribunals when get the superadded seals of courts for such awards, by the courts making them "Rules of Court" by their judgments and decrees, such awards do not get merged in judgments and decrees of courts so as to make them the decisions of courts, rendered in exercise of State's judicial power of decisionmaking, as it happens in the causes directly brought before them by way of suits for their decisions. As we have already pointed out, question of claim or cause of a party which gets merged in the award of a Special Arbitration Tribunal, in turn, getting merged in judgment and decree made by civil court, for the purpose of making the award a "Rule of Court", so as to make it enforceable, cannot arise. What needs to be noted is, that courts even if render their judgments and decrees for making the awards "Rules of Court", those judgments and decrees cannot substitute their own decisions for the decisions of Special Arbitration Tribunals contained in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "Rules of Court", cannot be said to be an encroachment upon the judicial powers of the State exercisable by the courts under the Constitution of India. 90. However, it is to be noted that in the very same judgment, this Court observed thus: "28. Thus, the impugned 1991 Amendment Act seeks to nullify the awards made by the Special Arbitration Tribunals constituted under the 1984 Amendment Act, in exercise of the power conferred upon them by that Act itself. When the awards made under the 1984 Amendment Act by the Special Arbitration Tribunals in exercise of the State's judicial power conferred upon them which cannot be regarded as those merged in Rules of Court or judgments and decrees of courts, are sought to be nullified by the 1991 Amendment Act, it admits of no doubt that legislative power of the State Legislature is used by enacting the impugned 1991 Amendment Act to nullify or abrogate the awards of the Special Arbitration Tribunals by arrogating to itself, a judicial power. [See Cauvery Water Disputes Tribunal, Re [1993 Supp (1) SCC 96 (2) : AIR 1992 SC 522 : 1991 Supp (2) SCR 497] ]. From this, it follows that the State Legislature by enacting the 1991 Amendment Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spect, the Court relied on the judgment of this Court in the case of Cauvery Water Disputes Tribunal [1993 Supp (1) SCC 96 (2)]. This Court further goes on to hold that the State Legislature by enacting the 1991 Amendment Act has encroached upon the judicial power vested in judicial authorities and as such, infringed the basic feature of the Constitution of India the "Rule of Law". As such, this Court held the 1991 Amendment Act to be unconstitutional on the ground that the arbitral awards passed by the Special Arbitration Tribunals under the 1984 Amendment Act are sought to be nullified by the 1991 Amendment Act. 93. A perusal of the aforesaid observations made in the case of G.C. Kanungo (supra) would reveal that on one hand, this Court goes on to hold that the judgments and decrees by which the civil courts make the awards "Rules of Court" are not passed in exercise of its judicial powers. As such, the awards do not merge in the judgments and decrees of the court. But on the other hand, the Court goes on to hold that the awards passed by the Special Arbitration Tribunals are the awards passed by the Tribunals exercising the judicial power and as such, when the State nullifies s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... without affecting such decision; or (c) where the award contains a clericalmistake or an error arising from an accidental slip or omission. 16. Power to remit award. -- (1) The Court may from time to time remit the award or any matter referred to arbitration to the arbitrators or umpire for reconsideration upon such terms as it thinks fit -- (a) where the award has leftundetermined any of the matters referred to arbitration, or where it determines any matter not referred to arbitration and such matter cannot be separated without affecting the determination of the matters referred; or (b) where the award is so indefinite as tobe incapable of execution; or (c) where an objection to the legality ofthe award is apparent upon the face of it. (2) Where an award is remitted under subsection(1) the Court shall fix the time within which the arbitrator or umpire shall submit his decision to the Court: Provided that any time so fixed may be extended by subsequent order of the Court. (3) An award remitted under subsection (1) shallbecome void on the failure of the arbitrator or umpire to reconsider it and submit his decision within the time fixed. 17. Judgment in te ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provides the grounds on which an award could be set aside. It provides that the award could be set aside when an arbitrator or umpire has misconducted himself or the proceedings. It could be set aside when it is found that the award has been made after the issue of an order by the Court superseding the arbitration or after arbitration proceedings have become invalid under Section 35. The award could also be set aside when the court finds that the award has been improperly procured or is otherwise invalid. 99. Section 17 of the 1940 Act empowers the court to pronounce a judgment according to the award, and upon the judgment so pronounced a decree is to follow. It further provides that no appeal shall lie on such decree except on the ground that it is in excess of, or not otherwise in accordance with, the award. However, prior to pronouncing the judgment, the court is required to be satisfied that no cause to remit the award or any of the matters referred to arbitration for reconsideration or to set aside the award, is made out. The Court is also required to wait till the time for making an application to set aside the award has expired, or such application having been made, has bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pediency: the statute empowers the Central Government to decide the disputes arising out of the claims made by the transferor or transferee which claim is opposed by the company, and by rendering a decision upon the respective contentions, the rights of the contesting parties are directly affected. Prima facie, the exercise of such authority would be judicial. It is immaterial that the statute which confers the power upon the Central Government does not expressly set out the extent of the power: but the very nature of the jurisdiction requires that it is to be exercised subject to the limitations which apply to the court under Section 155. The proviso to subsection (8) of Section 111 clearly indicates that in circumstances specified therein reasonable compensation may be awarded in lieu of the shares. This compensation which is to be reasonable has to be ascertained by the Central Government; and reasonable compensation cannot be ascertained except by the application of some objective standards of what is just having regard to all the circumstances of the case. In The Province of Bombay v. Kusaldas S. Advani [(1950) SCR 621] this Court considered the distinction between deci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e appellate control of this Court whenever it is found and necessary to exercise that control in the interests of justice." It was also observed by Fazi Ali, J. at p. 463, that a body which is required to act judicially and which exercises judicial power of the State does not cease to be one exercising judicial or quasijudicial functions merely because it is not expressly required to be guided by any recognised substantive law in deciding the disputes which come before it. The authority of the Central Government entertaining an appeal under Section 111(3) being an alternative remedy to an aggrieved party to a petition under Section 155 the investiture of authority is in the exercise of the judicial power of the State. Clause (7) of Section 111 declares the proceedings in appeal to be confidential, but that does not dispense with a judicial approach to the evidence. Under Section 54 of the Indian Income Tax Act (which is analogous) all particulars contained in any statement made, return furnished or account or documents produced under the provisions of the Act or in any evidence given, or affidavit or deposition made, in the course of any proceedings under the Act are to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Union of India [(1960) 2 SCR 775] where it was held that the Central Government in exercising power of review under the Mineral Concession Rules, 1949, was subject to the appellate jurisdiction conferred by Article 136. In that case which came to this Court on appeal from the High Court's order under Article 226, it was held on the authority of Province of Bombay v. Kushaldas S. Advani [(1950) SCR 621] and Rex v. Electricity Commissioners [(1924) 1 KB 171] that the action of the Central Government was quasijudicial and not administrative. It was then observed: "It is in the circumstances apparent that as soon as Rule 52 gives a right to an aggrieved party to apply for review a lis is created between him and the party in whose favour the grant has been made. Unless therefore there is anything in the statute to the contrary it will be the duty of the authority to act judicially and its decision would be a quasijudicial act." This observation only establishes that the decision is a quasijudicial one, but it does not say that the Central Government can be regarded as a tribunal. In my opinion, these are very different matters, and now that the question has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and a decision on evidence, and that is indubitably a curial function. His Lordship further held that in its various functions, Government often reaches a decision, but all decisions of the Government cannot be regarded as those of a tribunal. However, when Government embarks upon curial functions, and proceeds to exercise judicial power and decide disputes, it is legitimate to regard the officer who deals with the matter and even Government itself as a tribunal. His Lordship further goes on to hold that the officer who decides, may even be anonymous; but the decision is one of a tribunal, whether expressed in his name or in the name of the Central Government. 105. A Constitution Bench of this Court in the case of Shankarlal Aggarwala and Others v. Shankarlal Poddar and Others [1964] 1 SCR 717] , was considering a question as to whether the order passed by the Company Judge confirming the sale was an administrative order or a judicial order. Answering the said question, this Court, speaking through N. Rajagopala Ayyangar, J., observed thus: "On the basis of these provisions, we shall proceed to consider whether the confirmation of the sale was merely an order in the course of ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pervision of matters as distinguished from an order which decides the rights of parties or confers or refuses to confer rights to property which are the subject of adjudication before the Court. One of the tests would be whether a matter which involves the exercise of discretion is left for the decision of the authority, particularly if that authority were a Court, and if the discretion has to be exercised on objective, as distinguished from a purely subjective, consideration, it would be a judicial decision. It has sometimes been said that the essence of a judicial proceeding or of a judicial order is that there should be two parties and a lis between them which is the subject of adjudication, as a result of that order or a decision on an issue between a proposal and an opposition. No doubt, it would not be possible to describe an order passed deciding a lis before the authority, that it is not a judicial order but it does not follow that the absence of a lis necessarily negatives the order being judicial. Even viewed from this narrow standpoint it is possible to hold that there was a lis before the Company Judge which he decided by passing the order. On the one hand were the Clai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a court, and if the discretion has to be exercised on objective, as distinguished from a purely subjective, consideration, it would be a judicial decision. 107. We have, hereinabove, elaborately considered the scheme under Sections 15, 16 and 17 of the 1940 Act. The perusal of the said scheme would clearly reveal that before making an award "Rule of Court" by passing a judgment and decree, the court is required to take into consideration various factors, apply its mind and also exercise its discretion judicially. We find that the aforesaid provisions have not been considered in the case of G.C. Kanungo (supra). The perusal of the aforesaid provisions, as has been considered by us hereinabove, would clearly show that the power exercised by the court under Section 17 of the 1940 Act is a judicial power. We are therefore of the view that the findings in this respect as recorded by this Court in paragraphs 15 to 18 in the case of G.C. Kanungo (supra) would be per incuriam the provisions of the 1940 Act. 108. We further find that the two Constitution Benches in the cases of Harinagar Sugar Mills Ltd. (supra) and Shankarlal Aggarwala and Others (supra) have elaborately considered as to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only exceptions to this Rule are: (1) the court is entitled and bound to decide which of the two conflicting decisions of its own it will follow; (2) the Court is bound to refuse to follow a decision of its own which, though not expressly overruled, cannot, in its opinion stand with a decision of the House of Lords; and (3) the court is not bound to follow a decision of its own, if it is satisfied that the decision was given per incuriam e.g. where a statute or a rule having statutory effect which would have affected the decision was not brought to the attention of the earlier court. [See Young v. Bristol Aeroplane Co. Ltd. [LR 1944 KB 718 CA] which, on appeal to the House of Lords, was approved by Viscount Simon in LR 1946 AC 163 at p. 169]. A decision of the House of Lords upon a question of law is conclusive and binds the House in subsequent case. An erroneous decision of the House of Lords can be set right only by an Act of Parliament. [See Street Tramways v. London County Council [1898 AC 375] This limitation was repeated by Lord Wright in Radcliffe v. Ribble Motor Services Ltd. [1939 AC 215 at p. 245]" 110. In the case of State of U.P. and Another v. Synthetics and Chemical ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... core of judicial discipline. But that which escapes in the judgment without any occasion is not ratio decidendi. In B. Shama Rao v. Union Territory of Pondicherry [AIR 1967 SC 1480 : (1967) 2 SCR 650 : 20 STC 215] it was observed, 'it is trite to say that a decision is binding not because of its conclusions but in regard to its ratio and the principles, laid down therein'. Any declaration or conclusion arrived without application of mind or preceded without any reason cannot be deemed to be declaration of law or authority of a general nature binding as a precedent. Restraint in dissenting or overruling is for sake of stability and uniformity but rigidity beyond reasonable limits is inimical to the growth of law." 111. This Court further in the case of Sundeep Kumar Bafna v. State of Maharashtra and Another [(2014) 16 SCC 623], observed thus: "19. It cannot be overemphasised that the discipline demanded by a precedent or the disqualification or diminution of a decision on the application of the per incuriam rule is of great importance, since without it, certainty of law, consistency of rulings and comity of courts would become a costly casualty. A decision or judgment can be per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on would depend upon facts, which however would be jurisdictional facts, and are required to be gone into by the court……" [emphasis supplied] 115. While considering the discretion to be exercised by the court under Section 16 of the 1940 Act, this Court, in the case of Ramachandra Reddy & Co. v. State of A.P. and Others [(2001) 4 SCC 241] , observed thus: "5. Under the Arbitration Act, Section 16 is the provision under which the court may remit the award for reconsideration of an arbitrator and necessity for remitting the award arises when there are omissions and defects in the award, which cannot be modified or corrected. Remission of an award is in the discretion of the court and the powers of the court are circumscribed by the provisions of Section 16 itself. Ordinarily, therefore, a court may be justified in remitting the matter if the arbitrator leaves any of the matters undetermined or a part of the matter which had not been referred to and answered and that part cannot be separated from the remaining part, without affecting the decision on the matter, which was referred to arbitration or the award is so indefinite as to be incapable of execution or that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... test it is seen that at least in the matter of deciding his own jurisdiction and in the matter of deciding on the existence of an arbitration agreement, the Chief Justice when confronted with two points of view presented by the rival parties, is called upon to decide between them and the decision vitally affects the rights of the parties in that, either the claim for appointing an Arbitral Tribunal leading to an award is denied to a party or the claim to have an arbitration proceeding set in motion for entertaining a claim is facilitated by the Chief Justice. In this context, it is not possible to say that the Chief Justice is merely exercising an administrative function when called upon to appoint an arbitrator and that he need not even issue notice to the opposite side before appointing an arbitrator. 37. It is fundamental to our procedural jurisprudence, that the right of no person shall be affected without he being heard. This necessarily imposes an obligation on the Chief Justice to issue notice to the opposite party when he is moved under Section 11 of the Act. The notice to the opposite party cannot be considered to be merely an intimation to that party of the filing of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of judicial power. 119. A Constitution Bench of this Court in the case of State of Tamil Nadu v. State of Kerala and Another [(2014) 12 SCC 696], after an elaborate survey of all the earlier judgments, has summed up the Law on "separation of powers doctrine" under the Constitution of India, as under: "Summary of separation of powers doctrine under the Indian Constitution 126. On deep reflection of the above discussion, in our opinion, the constitutional principles in the context of Indian Constitution relating to separation of powers between the legislature, executive and judiciary may, in brief, be summarised thus: 126.1. Even without express provision of the separation of powers, the doctrine of separation of powers is an entrenched principle in the Constitution of India. The doctrine of separation of powers informs the Indian constitutional structure and it is an essential constituent of rule of law. In other words, the doctrine of separation of power though not expressly engrafted in the Constitution, its sweep, operation and visibility are apparent from the scheme of Indian Constitution. Constitution has made demarcation, without drawing formal lines between the three ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be within its competence but yet in substance if it is shown as an attempt to interfere with the judicial process, such law may be invalidated being in breach of doctrine of separation of powers. In such situation, the legal effect of the law on a judgment or a judicial proceeding must be examined closely, having regard to legislative prescription or direction. The questions to be asked are: (i) Does the legislative prescription orlegislative direction interfere with the judicial functions? (ii) Is the legislation targeted at thedecided case or whether impugned law requires its application to a case already finally decided? (iii) What are the terms of law; the issueswith which it deals and the nature of the judgment that has attained finality? If the answer to Questions (i) and (ii) is in the affirmative and the consideration of aspects noted in Question (iii) sufficiently establishes that the impugned law interferes with the judicial functions, the Court may declare the law unconstitutional." 120. It could thus be seen that the Constitution Bench in the aforesaid case held that, though a law enacted by the Legislature may apparently seem to be within its competence but ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he State Act is liable to be declared unconstitutional on this count. 123. We may also gainfully refer to the observations of this Court in the case of P. Tulsi Das and Others v. Govt. of A.P. and Others [(2003) 1 SCC 364]. In the said case, this Court, while considering the legislative power of the State to enact a law, which amounted to taking away the rights, which are already accrued to the parties long back, has observed thus: "14. On a careful consideration of the principles laid down in the above decisions in the light of the fact situation in these appeals we are of the view that they squarely apply on all fours to the cases on hand in favour of the appellants. The submissions on behalf of the respondent State that the rights derived and claimed by the appellants must be under any statutory enactment or rules made under Article 309 of the Constitution of India and that in other respects there could not be any acquisition of rights validly, so as to disentitle the State to enact the law of the nature under challenge to set right serious anomalies which had crept in and deserved to be undone, does not merit our acceptance. It is by now well settled that in the absence of r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ched the courts or not seeking relief individually. The provisions contained in Section 2 have to be read down so as to make it only prospective, to save the same from the unconstitutionality arising out of its retrospective application." [emphasis supplied] 124. It could be seen that this Court has held that the provisions of Sections 2 and 3(a) of the Andhra Pradesh Education Service Untrained Teachers (Regulation of Services and Fixation of Pay) Act, 1991 insofar as they purport to take away the rights accrued in favour of the citizens and requiring them to repay or restore them back to the State, are arbitrary, unreasonable and expropriatory. It has, therefore, been held that the said provisions are violative of Articles 14 and 16 of the Constitution of India. 125. As already discussed hereinabove, what has been done by the State Act, is annulling the awards and the judgments and decrees passed by the court vide which the awards were made "Rule of Court". As such, the rights which accrued to the parties much prior to the enactment of the State Act have been sought to be taken away by it. 126. Though, elaborate arguments have been advanced before us on various other issues, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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