Holding

The Kerala Act is referable to Entry 13 of List III and, despite presidential assent, its provisions that annul awards made "Rule of Court" transgress judicial power and are unconstitutional.

Summary

The Kerala government enacted the Kerala Revocation of Arbitration Clauses and Reopening of Awards Act, 1998 to cancel arbitration clauses in agreements for the Kallada Irrigation Project, revoke arbitrators' authority and permit appeals against awards that had become "Rule of Court". The High Court of Kerala held the Act unconstitutional, saying it was beyond the State's legislative competence and infringed the judiciary's power. The State appealed to the Supreme Court, arguing that arbitration falls under Entry 13 of List III of the Seventh Schedule and that the Act, having received Presidential assent under Article 254(2), should prevail over any central law. The Supreme Court examined the legislative competence, the doctrine of pith and substance, and the separation of powers doctrine, concluding that while the Act is within the State's competence, its provisions that annul awards made "Rule of Court" transgress judicial functions. Consequently, the Court struck down the Act as unconstitutional. The appeals were disposed of, effectively dismissing the State's challenge.

Issues considered

The Kerala Revocation of Arbitration Clauses and Reopening of Awards Act, 1998 is within the legislative competence of the Kerala State Legislature under Entry 13 of List III of the Seventh Schedule.
The Act encroaches upon the judicial power of the courts by annulling arbitration awards that have become "Rule of Court", thereby violating the doctrine of separation of powers.
Whether the Presidential assent under Article 254(2) of the Constitution validates the State Act in the face of any repugnancy with central legislation such as the Arbitration and Conciliation Act, 1996.

Legislation cited

Arbitration Act, 1940s. 15, s. 16, s. 17, s. 30
Arbitration and Conciliation Act, 1996s. 11, s. 20, s. 34, s. 8
Code of Civil Procedure, 1908
Constitution of Indias. 245, s. 246, s. 253, s. 254, s. 73
Kerala Revocation of Arbitration Clauses and Reopening of Awards Act, 1998s. 1, s. 2, s. 3, s. 4, s. 5, s. 6, s. 7, s. 8
Limitation Act, 1963

Subjects

ArbitrationLegislative competenceConcurrent ListPresidential assentSeparation of powersRule of CourtUNCITRAL Model LawConstitutional validityArbitration awards

Judgment

[2022] 3 S.C.R. 389 389

THE SECRETARY TO GOVT. OF KERALA, IRRIGATION A
DEPARTMENT AND OTHERS
v.
JAMES VARGHESE AND OTHERS
(Civil Appeal No. 6258 of 2014) B
MAY 04, 2022
[L. NAGESWARA RAO AND B. R. GAVAI, JJ.]
Kerala Revocation of Arbitration Clauses and Reopening of
Awards Act, 1998 – Constitutional validity of – Challenged, on
C
ground of legislative competence of the State Legislature –
Agreements relating to a State Irrigation Project – Disputes –
Arbitration references – State enacted Kerala Act of 1998 which
provided for cancellation of arbitration clauses in the agreements,
revocation of authority of the arbitrators appointed thereunder and
filing of appeals against awards or decrees already passed in certain D
arbitration references in respect of which period of limitation had
expired – Whether the State Legislature had the legislative
competence to enact the Kerala Act of 1998 – Held: The Kerala Act
of 1998 in pith and substance is referable to Entry 13 of List III of
Seventh Schedule to the Constitution and not to the Entries 12, 13,
E
14 and 37 of List I of the Seventh Schedule nor to Art.253 of the
Constitution – The Kerala Act of 1998, therefore, is within the
legislative competence of the State Legislature – In any case, in
view of the Presidential assent u/Art.254(2) of the Constitution, the
Kerala Act of 1998 would prevail within the State of Kerala –
Constitution of India, 1950 – Seventh Schedule, List III, Entry 13 F
and Art.254(2) – Arbitration Act, 1940 – Doctrines / Principles –
Doctrine of pith and substance.
Kerala Revocation of Arbitration Clauses and Reopening of
Awards Act, 1998 – Constitutional validity of – Challenged, on
ground of encroachment upon judicial powers of the State – G
Agreements relating to a State Irrigation Project – Disputes –
Arbitration references – State enacted Kerala Act of 1998 which
provided for cancellation of arbitration clauses in the agreements,
revocation of authority of the arbitrators appointed thereunder and
filing of appeals against awards or decrees already passed in certain
H
389
390 SUPREME COURT REPORTS [2022] 3 S.C.R.

A arbitration references in respect of which period of limitation had
expired – Whether the Kerala Act of 1998 encroached on judicial
powers of the courts and as such, was hit by the doctrine of
separation of powers – Held: Though a law enacted by the
Legislature may apparently seem to be within its competence but yet
in substance if it is shown as an attempt to interfere with the judicial
B
process, such law may be invalidated being in breach of doctrine
of separation of powers – The Kerala Act of 1998, which has the
effect of annulling 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” – The Kerala Act of
C 1998 encroaches upon the judicial powers of the State and is
therefore liable to be struck down as being unconstitutional on this
count – Doctrines/Principles – Doctrine of “separation of powers”.
Constitution of India, 1950 – Seventh Schedule, List III, Entry
13 –Arbitration – Legislative competence of the State Legislature –
D Held: The subject of arbitration finds place in Entry 13 of List III,
i.e., the Concurrent List of the Seventh Schedule to the Constitution
– Since the subject of arbitration is in the Concurrent List, the State
can also make a law with regard to the same.
Constitution of India, 1950 – Art.254, clause (2) – Conflict
E between the Central law and the State law – Held: Ordinarily, if
there is any conflict between the Central law and the State law, in
view of clause (1) of Art.254, the Central law would prevail –
However, in view of clause (2) of Art.254, the State law would prevail
when it is reserved for consideration and receives assent of the
President of India.
F
Legislature – State Legislature – Legislative competence of –
Challenge to, on ground that it encroached upon the legislative
competence of the Parliament – Held: 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
G so determined, any incidental trenching on the field reserved to the
other legislature is of no consequence – 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 – If the State is competent to legislate on the subject, any
H incidental encroachment on any item in List I would not affect the
THE SECRETARY TO GOVT. OF KERALA, IRRIGATION 391
DEPARTMENT v. JAMES VARGHESE

State Legislature – Constitution of India, 1950 – Seventh Schedule A
– Lists I, II and III.
Arbitration Act, 1940 – Powers exercised by the court under
provisions of the Act in passing judgments and decrees for making
the arbitration awards “Rule of Court” – Nature of – Held: They
are judicial powers – Power to make an arbitration award “Rule of B
Court” is not a mechanical power.
Doctrines / Principles – “Separation of powers doctrine”
under the Constitution – Discussed.
United Nations Commission on International Trade Law
(UNCITRAL) Model Law on International Commercial Arbitration C
– Resolution dated 11th December 1985 passed by the United Nations
General Assembly – Effect of – Held: The General Assembly only
recommended the adoption of UNCITRAL Model Law insofar as
international commercial arbitration practices are concerned –
Parliament, with certain modifications, has given due consideration D
to UNCITRAL Model Law for legislation on 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 –
Arbitration and Conciliation Act, 1996.
Disposing the appeals, the Court E
HELD:
LEGISLATIVE COMPETENCE OF THE STATE
LEGISLATURE TO ENACT THE KERALA REVOCATION OF
ARBITRATION CLAUSES AND REOPENING OF AWARDS
ACT, 1998: F
1.1. The subject of arbitration finds place in Entry 13 of
List III, i.e., the Concurrent List of the Seventh Schedule to the
Constitution of India. The legislation pertaining to the said entry
could be made either by the Parliament or the State Legislature.
Since the subject of arbitration is in the Concurrent List, the G
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
H
392 SUPREME COURT REPORTS [2022] 3 S.C.R.

A concerned, notwithstanding its repugnancy with an earlier
Parliamentary enactment made on the subject. In the present
case also, the Kerala Revocation of Arbitration Clauses and
Reopening of Awards Act, 1998 (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
B
enacted would prevail in the State of Kerala. [Para 62][423-G-H;
424-A-B]
1.2. Ordinarily, if there is any conflict between the Central
law and the State law, in view of clause (1) of Article 254 of the
Constitution of India, the Central law would prevail. However, in
C view of clause (2) of Article 254 of the Constitution of India, the
State law would prevail when it is reserved for consideration and
receives assent of the President of India. [Para 66][425-G-H;
426-A]
1.3. When the legislative competence of a State Legislature
D 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
E 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 true character of the legislation
has to be ascertained. Regard must be had to the enactment as a
whole, to its main objects and to the scope and effect of its
provisions. Incidental and superficial encroachments are to be
F disregarded. 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.
[Para 71][431-D-G]
1.4. If one looks at the scheme of the State enactment, the
G subject matter of the enactment is arbitration. If the State is
competent to legislate on the subject, any incidental
encroachment on any item in List I would not affect the State
Legislature. [Para 72][431-G-H]

H
THE SECRETARY TO GOVT. OF KERALA, IRRIGATION 393
DEPARTMENT v. JAMES VARGHESE

State of West Bengal v. Kesoram Industries Ltd. and A
Others (2004) 10 SCC 201 : [2004] 1 SCR 564 –
followed.
G.C. Kanungo v. State of Orissa, (1995) 5 SCC 96:
[1995] 1 Suppl. SCR 510; Madhya Pradesh Rural Road
Development Authority and Another v. L.G. Chaudhary B
Engineers and Contractors (2018) 10 SCC 826 and G.
Mohan Rao and Others v. State of Tamil Nadu and
Others, 2021 SCC online SC 440 – relied on.
Maharaj Umeg Singh and Others v. State of Bombay
and Others [1955] 2 SCR 164; State of Gujarat through C
Chief Secretary and Another v. Amber Builders (2020)
2 SCC 540; Madhya Pradesh Rural Road Development
Authority and Another v. L.G. Chaudhary Engineers and
Contractors (2012) 3 SCC 495 : [2012] 2 SCR 162;
Hoechst Pharmaceutical Ltd. and Others v. State of
Bihar and Others (1983) 4 SCC 45 : [1983] 3 SCR D
130; Kavalappara Kottarathil Kochuni @ Moopil Nayar
v. States of Madras and Kerala and Others [1960] 3
SCR 887; M. K. Ranganathan v. Government of Madras
and Others [1955] 2 SCR 374; Calcutta Gas Company
(Proprietary) Ltd. v. State of West Bengal and Others E
[1962] Supp 3 SCR 1; Sri Venkataramana Devaru and
Others v. State of Mysore and Others [1958] SCR 895;
Fuerst Day Lawson Limited v. Jindal Exports Limited
(2011) 8 SCC 333 : [2011] 11 SCR 1; Rajiv Sarin and
Another v. State of Uttarakhand and Others (2011) 8
SCC 708 : [2011] 9 SCR 1012; Maganbhai Ishwarbhai F
Patel Etc. v. Union of India and Another (1970) 3 SCC
400 : [1969] 3 SCR 254; State of Bihar and Others v.
Bihar Chamber of Commerce and Others (1996) 9 SCC
136 : [1996] 2 SCR 184; Jayant Verma and Others v.
Union of India and Others (2018) 4 SCC 743 : [2018] G
2 SCR 679; Suraj Mall Mohta and Co. v. A.V.
Visvanatha Sastri and Another [1955] 1 SCR 448; B.B.
Rajwanshi v. State of U.P. and Others (1988) 2 SCC
415 : [1988] 3 SCR 469; Satish Kumar and Others v.
Surinder Kumar and Others [1969] 2 SCR 244; Andhra
H
394 SUPREME COURT REPORTS [2022] 3 S.C.R.

A Pradesh Dairy Development Corporation Federation
v. B. Narasimha Reddy and Others (2011) 9 SCC 286:
[2011] 14 SCR 1; Ssangyong Engineering and
Construction Company Limited v. National Highways
Authority of India (NHAI) (2019) 15 SCC 131 : [2019]
7 SCR 522; SREI Infrastructure Finance Limited v. Tuff
B
Drilling Private Limited (2018) 11 SCC 470 : [2017]
12 SCR 933; Saverbhai Amaidas v. State of Bombay
[1955] 1 SCR 799; T. Barai v. Henry Ah Hoe and
Another (1983) 1 SCC 177 : [1983] 1 SCR 90; Gram
Panchayat of Village Jamalpur v. Malwinder Singh and
C Others (1985) 3 SCC 661 : [1985] 2 Suppl.
SCR 28; State of Maharashtra v. Mrs. Kamal Sukumar
Durgule and Others (1985) 1 SCC 234 : [1985] 2 SCR
129; Ashok Kumar alias Golu v. Union of India and
Others (1991) 3 SCC 498 : [1991] 2 SCR 858; S.S.
Bola and Others v. B.D. Sardana and Others (1997) 8
D
SCC 522 : [1997] 2 Suppl. SCR 507; Madras Bar
Association v. Union of India and Another 2021 SCC
OnLine SC 463; State of Kerala and Others v. Mar
Appraem Kuri Company Limited and Another (2012) 7
SCC 106 : [2012 4 SCR 448; State of Tamil Nadu and
E Others v. K. Shyam Sunder and Others (2011) 8 SCC
737 : [2011] 11 SCR 1094; Deep Chand and Others v.
State of Uttar Pradesh and Others [1959] Supp 2 SCR
8; Ladli Construction Co. (P) Ltd. v. Punjab Police
Housing Corpn. Ltd. and Others (2012) 4 SCC 609 :
[2012] 4 SCR 780; Hindustan Construction Co. Ltd.
F
and Another v. Union of India and Others (2020) 17
SCC 324: [2019] 17 SCR 331; K. Nagaraj and Others
v. State of Andhra Pradesh and Another (1985) 1 SCC
523 : [1985] 2 SCR 579; Nagpur Improvement Trust
and Another v. Vithal Rao and Others (1973) 1 SCC
G 500; State of Kerala and Others v. T.M. Peter and Others
(1980) 3 SCC 554; Cauvery Water Disputes Tribunal,
1993 Supp (1) SCC 96 (2) : [1991] 2 Suppl. SCR 497
and State of Bombay and Another v. United Motors
(India) Limited and Others [1953] SCR 1069 – referred
to.
H
THE SECRETARY TO GOVT. OF KERALA, IRRIGATION 395
DEPARTMENT v. JAMES VARGHESE

WHETHER THE ARBITRATION AND CONCILIATION A
ACT, 1996 HAVING BEEN ENACTED BY THE PARLIAMENT
UNDER ARTICLE 253 OF THE CONSTITUTION AND IN
ACCORDANCE WITH THE DECISION TAKEN AT THE
INTERNATIONAL CONFERENCE TO IMPLEMENT THE
UNCITRAL MODEL LAW, THE STATE LEGISLATURE IS
B
NOT COMPETENT TO ENACT THE STATE ACT.
2.1. The Preamble of the Arbitration and Conciliation Act,
1996 reveals that the recommendation of the General Assembly
of the United Nations is for adopting UNCITRAL Model Law
insofar as international commercial arbitrations are concerned.
Further, paragraphs (2) and (3) of the Statement of Objects and C
Reasons of the 1996 Act clearly reveals 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. D
There is thus 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 E
arbitration. However, that cannot by itself be said to be binding
on the Parliament to enact the law in accordance with UNCITRAL
Model Law. [Paras 77, 78 and 79][433-D-E; 434-D-F]
2.2. A perusal of the Resolution dated 11th December 1985
passed by the United Nations General Assembly (40/72. Model F
Law on International Commercial Arbitration of the United
Nations Commission on International Trade Law) clearly reveals
that what has been done by the United Nations General Assembly
vide the aforesaid Resolution is to recommend to all the States
to give due consideration to the Model Law on international G
commercial arbitration. However, it does not create any binding
obligation on the States to enact the UNCITRAL Model Law as
it is. [Paras 80, 81][435-G-H]

H
396 SUPREME COURT REPORTS [2022] 3 S.C.R.

A 2.3. 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. The Resolution of the General
Assembly of the United Nations is only recommendatory in nature
B
and there is no binding decision taken thereat. [Para 85]
[437-F-H]
S. Jagannath v. Union of India and Others (1997) 2
SCC 87 : [1996] 9 Suppl. SCR 848 and Mantri Techzone
Private Limited v. Forward Foundation and Others
C (2019) 18 SCC 494 – held inapplicable.
STATE LEGISLATURE’S ENCROACHMENT ON
JUDICIAL POWERS:
3.1. The State Act is liable to be held unconstitutional on
the ground of encroachment upon the judicial powers of the State.
D [Para 126][469-D]
3.2. In the present case, all the awards so also the judgments
and decrees passed by the civil courts making such awards “Rules
of Court” have been passed under the Arbitration Act, 1940. The
perusal of the scheme of the Arbitration Act, 1940 would itself
E 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 modify the awards. As such, it cannot
be said that the court, while passing a judgment, which is followed
F by a decree, does not exercise judicial power. The court is not
supposed to act mechanically and be a Post-Office. The powers
exercised by the court under the provisions of the 1940 Act are
judicial powers and the power to make an award “Rule of Court”
is not a mechanical power. [Paras 94, 100 and 113][444-H; 445-
G A; 447-E-G; 461-A-B]
3.3. Though a law enacted by the Legislature may apparently
seem to 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. [Para 120][466-D-E]
H
THE SECRETARY TO GOVT. OF KERALA, IRRIGATION 397
DEPARTMENT v. JAMES VARGHESE

3.4. A perusal of the various provisions of the State Act A
would clearly show that the State Act has been enacted since the
State Government was aggrieved by various awards passed against
it. It was therefore found expedient, in the public interest, to
cancel the arbitration clause in the agreement, to revoke the
authority of the arbitrators appointed thereunder and to enable
B
the filing of appeals against the awards or decrees. Most of the
awards were made “Rules of Court” prior to 1993. In many of
the cases, appeals were also preferred by the State Government.
As such, it is found that the legislative prescriptions and
legislative directions in the State Act undoubtedly interfere with
the judicial functions. It is also clear that the legislation is targeted C
at the awards passed which have become “Rule of Court”. The
powers exercised by the courts under Section 17 of the 1940 Act
are judicial powers of the State. Upon consideration of the terms
of the State Act, the issues with which it deals, it is clear that the
State Act interferes with the judicial functions. [Para 121]
D
[466-G-H; 467-A-C]
3.5. 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. The State Act, E
which has the effect of annulling 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. [Paras 122, 125][467-C-D; F
469-C]
G.C. Kanungo v. State of Orissa (1995) 5 SCC 96 :
[1995] 1 Suppl. SCR 510 – held per incuriam and also
hit by rule of sub silentio.
Harinagar Sugar Mills Ltd. v. Shyam Sundar G
Jhunjhunwala and Others [1962] 2 SCR 339;
Shankarlal Aggarwala and Others v. Shankarlal
Poddar and Others (1964) 1 SCR 717; Bengal Immunity
Company Limited v. State of Bihar and Others [1955] 2
SCR 603; SBP & Co. v. Patel Engineering Ltd. and H
398 SUPREME COURT REPORTS [2022] 3 S.C.R.

A Another (2005) 8 SCC 618 : [2005] 4 Suppl. SCR 688
and State of Tamil Nadu v. State of Kerala and Another
(2014) 12 SCC 696 : [2014] 12 SCR 875 – followed.
State of U.P. and Another v. Synthetics and Chemicals
Ltd. and Another (1991) 4 SCC 139: [1991] 3 SCR 64;
B Sundeep Kumar Bafna v. State of Maharashtra and
Another (2014) 16 SCC 623 : [2014] 4 SCR 486; Steel
Authorityof India Ltd. v. J.C. Budharaja, Government
and Mining Contractor (1999) 8 SCC 122 : [1999]
2 Suppl. SCR 155; P. Tulsi Das and Others v. Govt. of
A.P. and Others (2003) 1 SCC 364 : [2002] 3 Suppl.
C SCR 306 and Ramachandra Reddy & Co. v. State of
A.P. and Others (2001) 4 SCC 241 : [2001] 2 SCR 186
– relied on.
CONCLUSION:

D 4.1. 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
E 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.
[Para 127][469-E-G]
4.2. The finding in the case of G.C. Kanungo to the effect
F that the powers exercised by the courts in passing judgments
and decrees for making the arbitration awards “Rule of Court”
is not an exercise of judicial power, is per incuriam the provisions
of the 1940 Act and the judgments of the Constitution Bench in
the cases of Harinagar Sugar Mills Ltd. and Shankarlal Aggarwala
G and Others. [Para 127][469-G-H]
4.3. The High Court of Kerala is right in law in holding that
the State Act encroaches upon the judicial power of the State and
is therefore liable to be struck down as being unconstitutional.
[Para 127][470-A-B]
H
THE SECRETARY TO GOVT. OF KERALA, IRRIGATION 399
DEPARTMENT v. JAMES VARGHESE

Case Law Reference A
[1955] 2 SCR 164 referred to Para 17
(2020) 2 SCC 540 referred to Para 18
[2012] 2 SCR 162 referred to Para 18
(2018) 10 SCC 826 relied on Para 18 B
[1983] 3 SCR 130 referred to Para 20
[2004] 1 SCR 564 followed Para 20
[1960] 3 SCR 887 referred to Para 21
C
[1955] 2 SCR 374 referred to Para 22
[1962] Supp 3 SCR 1 referred to Para 23
[1958] SCR 895 referred to Para 23
[2011] 11 SCR 1 referred to Para 26
D
[2011] 9 SCR 1012 referred to Para 27
[1969] 3 SCR 254 referred to Para 31
[1996] 9 Suppl. SCR 848 held inapplicable Para 31
(2019) 18 SCC 494 held inapplicable Para 32
E
[1996] 2 SCR 184 referred to Para 32
[2018] 2 SCR 679 referred to Para 32
[1955] 1 SCR 448 referred to Para 33
[1988] 3 SCR 469 referred to Para 33 F
[1969] 2 SCR 244 referred to Para 36
[2011] 14 SCR 1 referred to Para 37
[2019] 7 SCR 522 referred to Para 38
[2017] 12 SCR 933 referred to Para 39 G
[1955] 1 SCR 799 referred to Para 41
[1983] 1 SCR 90 referred to Para 41
[1985] 2 Suppl. SCR 28 referred to Para 42
H
400 SUPREME COURT REPORTS [2022] 3 S.C.R.

A [1985] 2 SCR 129 referred to Para 43
[1991] 2 SCR 858 referred to Para 44
[1997] 2 Suppl. SCR 507 referred to Para 44
[2012] 4 SCR 448 referred to Para 46
B [2011] 11 SCR 1094 referred to Para 48
[1959] 2 Suppl. SCR 8 referred to Para 48
[2012] 4 SCR 780 referred to Para 49
[2019] 17 SCR 331 referred to Para 50
C
[1985] 2 SCR 579 referred to Para 53
(1973) 1 SCC 500 referred to Para 55
(1980) 3 SCC 554 referred to Para 55
[1995] 1 Suppl. SCR 510 relied on Para 61
D
[1991] 2 Suppl. SCR 497 referred to Para 92
[1962] 2 SCR 339 followed Para 101
[1964] 1 SCR 717 followed Para 105
[1955] 2 SCR 603 followed Para 109
E
[1953] SCR 1069 referred to Para 109
[1991] 3 SCR 64 relied on Para 110
[2014] 4 SCR 486 relied on Para 111

F [1995] 1 Suppl. SCR 510 held per incuriam Para 112
and also hit by rule
of sub silentio
[1999] 2 Suppl. SCR 155 relied on Para 114
G [2001] 2 SCR 186 relied on Para 115
[2005] 4 Suppl. SCR 688 followed Para 116
[2014] 12 SCR 875 followed Para 119
[2002] 3 Suppl. SCR 306 relied on Para 123
H
THE SECRETARY TO GOVT. OF KERALA, IRRIGATION 401
DEPARTMENT v. JAMES VARGHESE

CIVIL APPELLATE JURISDICTION : Civil Appeal No.6258 A
of 2014.
From the Judgment and Order dated 09.07.2013 of the High Court
of Kerala at Ernakulam in O.P. No.4206 of 1998.
With
B
Civil Appeal Nos. 9236, 9241, 9226, 6268, 6264, 6265, 6266, 6260,
6262, 6259, 6267 of 2014, Civil Appeal No.295 of 2015, Civil Appeal
Nos.6261, 8995, 9022, 9016, 9005, 8998, 9009, 8997, 9002, 8996, 8999,
9007, 9004, 9003, 9008, 9017, 9000, 9001, 9215, 9213, 9018, 9217, 9006,
9019, 9219, 9237, 9225, 9221, 9238, 9023, 9243, 9244, 9224, 9212, 9211,
9222, 9020, 9210 And 9239 of 2014, Civil Appeal No.3010 of 2017, Civil C
Appeal Nos.2824, 2825 And 2826 of 2022.
Krishnan Venugopal, Jaideep Gupta, Pallav Sisodia, Prashanto
Chandra Sen, C. N. Sreekumar, Sr. Advs., Kuriakose Varghese, V.
Shyamohan, Surya Prakash, Kaushik Mishra, Ms. Deepanshi Ishar, Ms.
Pallavi Srivastava, J. Rajesh, Ms. Astu Khandelwal, Akshat Gogna, M/ D
s Kmnp Law, C. K. Sasi, Abdullah Naseeh, Ms. Meena P., Ms. Manika
Priya Saravanan, Riddhi Bose, Siddharth, Abraham C. Mathews,
Mohammed Sadique T. A., Ms. Anu K. Joy, Alim Anvar, Rajeev Mishra,
Sanand Ramakrishnan, Sunil Narayanan, John Mathew, Babu Thomas
K., Wills Mathews, Ginesh P., Devendra Kumar Tiwari, Paul John Edison, E
Rabin Majumder, Ms. Abhisree Saujanya, Ms. Haripriya Padmanabhan,
Ms. Ishita Chowdhury, Ms. Tanya Srivastava, Roy Abraham, Ms. Reena
Roy, Akhil Abraham, Aditya Koshy, Himinder Lal, Aljo K. Joseph, Ms.
Shela K., Mrs. Sudha Gupta, Ranjan Kumar, Ritesh Kumar Chowdhary,
Rajesh P., Ms. Anupama Kumar, Amit Sharma, Prakash Ranjan Nayak,
P. I. Jose, Prashant K. Sharma, Ms. Jenis V. Francis, K. V. Mohan, F
Merry S. Mathew, Hitesh Kumar Sharma, Akhileshwar Jha, Ms. K. M.
Kavitha, Pukhrambam Ramesh Kumar, Ms. Anupama Ngangom, Karun
Sharma, Nishe Rajen Shonker, Jogy Scaria, G. Prakash, Advs. for the
appearing parties.
The Judgment of the Court was delivered by G
B. R. GAVAI, J.
1. Two important questions of law, with regard to the legislative
competence of the Kerala State Legislature to enact the Kerala
Revocation of Arbitration Clauses and Reopening of Awards Act, 1998
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402 SUPREME COURT REPORTS [2022] 3 S.C.R.

A (hereinafter referred to as the “State Act”) and as to whether the State
Act encroaches upon the judicial power of the State, are involved in the
present appeals.
• BACKGROUND:
2. The High Court of Kerala at Ernakulam, by the impugned
B
judgment dated 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
C 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
D 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”)
E
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 provided for the settlement of matters in
dispute or difference through arbitration. The same was provided with a
view to enable speedy settlement of matters in dispute or difference in a
F just and equitable manner. The State of Kerala found that on account of
various disputes and differences, the arbitration references did not have
the desired effect inasmuch as several arbitrators had wrongly and
arbitrarily awarded unconscionable amounts against the provisions of
agreements and without material on record, in collusion with the claimant
contractors and officials of the department, thereby causing heavy losses
G
to the State. As such, the State of Kerala considered it necessary, in
public interest, to cancel the arbitration clauses in the agreements
executed in terms of LCBS, to revoke the authority of the arbitrators
appointed thereunder and to enable the filing of appeals against the awards
or decrees already passed in certain arbitration references in respect of
H
THE SECRETARY TO GOVT. OF KERALA, IRRIGATION 403
DEPARTMENT v. JAMES VARGHESE [B. R. GAVAI, J.]

which the period of limitation had expired. As such, the State Act came A
to be enacted with effect from 14th November 1997.
4. The State Act is a short Act and therefore, we deem it
appropriate to reproduce the same in its entirety as under:
“Kerala Revocation of Arbitration Clauses and Reopening
of Awards Act, 1998 B

Preamble …………..
………..
Section 1 - Short title, extent, commencement and
application C
(1) This Act may be called the Kerala Revocation of Arbitration
Clauses and Reopening of Awards Act, 1998.
(2) It extends to the whole of the State of Kerala.
(3) It shall be deemed to have come into force on the 14th day of D
November, 1997.
(4) It shall apply to all agreements executed in terms of the local
competitive bidding specification.
Section 2 - Definitions
E
(1) In this Act, unless the context otherwise requires,
(a) “agreement” means an agreement executed in terms of
the local competitive bidding specification for various works
of the Government of Kerala;
(b) “local competitive bidding specification” means the local F
competitive bidding specification adopted by the Government
in their Order G.O. (Ms) No. 3/81/I&R dated the 20th January,
1981.
(2) Words and expressions used but not defined in this Act and
defined in G
(a) the Arbitration Act, 1940 (Central Act 10 of 1940); or
(b) the Arbitration and Conciliation. Act, 1996 (Central Act 26
of 1996), in relation to arbitration proceedings commenced on
or after the 25th day of January, 1996,
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404 SUPREME COURT REPORTS [2022] 3 S.C.R.

A 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 the Indian Contract Act,
B 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,
C (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

D (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 sub-section (1) shall be a bar for any party to a
E agreement to file a suit in the court having jurisdiction in the matter
to which the agreement relates and all questions regarding the
validity or effect of the agreement between the parties to the
agreement or persons claiming under them and all matters in
dispute or difference between the parties to the agreement shall
be decided by the court, as if the arbitration clauses had never
F
been included in the agreement.
Section 4 - Period of limitation for filing suits
Notwithstanding anything contained in the Arbitration Act, 1940
(Central Act 10 of 1940) or in the Arbitration and Conciliation
G Act, 1996 (Central Act 26 of 1996) or in the Limitation Act, 1963
(Central Act 36 of 1963), a suit under sub-section (2) of section 3
may be filed within six months from the date of commencement
of this Act or within such period as is allowed by the provisions of
the Limitation Act, 1963 (Central Act 36 of 1963), in relation to
such suits, whichever is later.
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THE SECRETARY TO GOVT. OF KERALA, IRRIGATION 405
DEPARTMENT v. JAMES VARGHESE [B. R. GAVAI, J.]

Section 5 - Power of Government to file appeal against A
certain awards
Notwithstanding anything contained 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 the Limitation Act, 1963
(Central Act 36 of 1963) or in any other law for the time being in B
force or in any judgement, decree or order of any court or other
authority or in any agreement or other instrument, where it appears
to the Government that any award passed is not in accordance
with the terms of the agreement or there was failure to produce
relevant data or other particulars before the Arbitrator before
passing the award or the award passed is of unconscionable C
amounts, they may file appeal against such award within ninety
days of the date of commencement of this Act.
Section 6 - Procedure before court
For the removal of doubts, it is hereby clarified that the provisions D
of the Code of Civil Procedure, 1908 (Central Act 5 of 1908),
shall apply to all proceedings before court and to all appeals under
this Act.
Section 7 - Arbitration Act not to apply
The provisions of this Act shall apply to any proceedings instituted E
under this Act notwithstanding anything inconsistent herein with
the provisions of the Arbitration Act, 1940 (Central Act 10 of
1940) or the Arbitration and Conciliation Act, 1996 (Central Act
26 of 1996) or any other law for the time being in force.
Section 8 - Repeal and saving F
(1) The Kerala Revocation of Arbitration Clauses and Reopening
of Awards Ordinance, 1998 (6 of 1998), is hereby repealed.
(2) 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 G
taken under this Act.”
5. Section 3 of the State Act provides for “Cancellation of
arbitration clauses and revocation of authority of arbitrator”. Sub-section
(1) of Section 3 of the State Act provides that notwithstanding anything
H
406 SUPREME COURT REPORTS [2022] 3 S.C.R.

A 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
B
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 effect insofar as it relates to the matters in dispute
or difference referred. The same shall be with effect on and from the
date of commencement of the State Act. Sub-section (2) of Section 3 of
C the State Act provides that nothing provided in sub-section (1) of Section
3 of the State Act shall be a bar for any party to an agreement to file a
suit in the court having jurisdiction in the matter to which the agreement
relates and all questions regarding the validity or effect of the agreement
between the parties to the agreement or persons claiming under them
D and all matters in dispute or difference between the parties to the
agreement shall be decided by the court, as if the arbitration clauses had
never been included in the agreement.
6. Section 4 of the State Act enables a party to file a suit under
sub-section (2) of Section 3 of the State Act within a period of six months
E from the date of commencement of the State Act or within such period
as is allowed by the provisions of the Limitation Act, 1963 (hereinafter
referred to as “1963 Act”), in relation to such suits whichever is later.
This is notwithstanding anything contained in the 1940 Act or in the 1996
Act or in the 1963 Act.
F 7. Section 5 of the State Act enables the State Government to file
an appeal against any award within a period of 90 days from the date of
commencement of the State Act, where it appears to the State
Government that any award passed is not in accordance with the terms
of the agreement or there was failure to produce relevant data or other
G particulars before the Arbitrator before passing the award or the award
passed is of unconscionable amounts. Again, this is notwithstanding
anything contained in the 1940 Act or in the 1996 Act or in the 1963 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.
H
THE SECRETARY TO GOVT. OF KERALA, IRRIGATION 407
DEPARTMENT v. JAMES VARGHESE [B. R. GAVAI, J.]

8. Section 6 of the State Act clarifies that the provisions of the A
Code of Civil Procedure, 1908 (hereinafter referred to as “CPC”) shall
apply to all proceedings before the court and to all appeals under the
State Act.
9. Section 7 of the State Act provides that the provisions of the
State Act shall apply to any proceedings instituted under the State Act B
notwithstanding anything inconsistent therein with the provisions of the
1940 Act or the 1996 Act or any other law for the time being in force.
10. Sub-section (1) of Section 8 of the State Act repeals the Kerala
Revocation of Arbitration Clauses and Reopening of Awards Ordinance,
1998. Sub-section (2) of Section 8 of the State Act provides that C
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 D
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.
E
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: F
(i) That the 1940 Act, Arbitration (Protocol and Convention)
Act, 1937 (hereinafter referred to as “1937 Act”) and
the Foreign Awards (Recognition and Enforcement) Act,
1961 (hereinafter referred to as “1961 Act”) had
become outdated. As such, the Parliament found it
G
expedient to make a law with respect to arbitration and
conciliation, taking into account the United Nations
Commission on International Trade Law (for short
“UNCITRAL”) Model Law and Rules. The 1996 Act
was enacted with the clear intention of harmonizing
concepts on arbitration and conciliation of different legal H
408 SUPREME COURT REPORTS [2022] 3 S.C.R.

A systems of the world on the basis of UNCITRAL Model
Law and Rules. As such, the matters dealt with by the
1996 Act were not the matters merely falling under Entry
13 of List III of the Seventh Schedule to the Constitution
of India but also falling within Entries 10 to 14 of List I
of the Seventh Schedule to the Constitution of India;
B
(ii) Since Entries 10 to 14 of List I of the Seventh Schedule
to the Constitution of India deal with foreign affairs,
relationship with foreign countries, United Nations
Organization, participation in international conferences,
associations and other bodies and implementing of
C decisions made thereat, entering into treaties and
agreements and implementing of treaties, agreements
and conventions, the issue of applicability of Article 253
of the Constitution of India would arise. As such, the
Union Parliament had an overriding legislative power
D to make any law for the whole or any part of the territory
of India. Once a Central Legislation referable to Article
253 of the Constitution of India comes into being, then
the State Act cannot be said to be valid only in view of
the Presidential assent received under Article 254 (2)
of the Constitution of India;
E
(iii) That the executive power of the Union is coextensive
with the legislative power of the Parliament under Article
73(1)(b) of the Constitution of India. As such, the 1996
Act is enacted by the Central Legislation in order to
give effect to the executive power of the Government
F of India, to give effect to the decisions taken at the
international conference. As such, if it is held that the
Presidential assent under Article 254 (2) of the
Constitution of India would validate the State Act, then
the very purpose of Article 253 of the Constitution of
G India would be destroyed;
(iv) That LCBS can be traced only to entries in the Union
List, in particular, to Entry 37, as 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
H Constitution of India deals with foreign loans. That
THE SECRETARY TO GOVT. OF KERALA, IRRIGATION 409
DEPARTMENT v. JAMES VARGHESE [B. R. GAVAI, J.]

Article 292 of the Constitution of India specifically deals A
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
B
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 C
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 D
part of the seminal constitutional values, including
separation of powers; and
(vi) That there was nothing on record to show that any
relevant material had gained the attention of the
legislature except the superfluous statements in the E
Preamble to the State Act with regard to misconduct
by arbitrators. As such, the State Act suffers on the
said count also.
14. We have extensively heard Shri Jaideep Gupta, and Shri Pallav
Shishodia, learned Senior Counsel appearing on behalf of the appellants. F
Shri Krishnan Venugopal, learned Senior Counsel led the arguments on
behalf of the respondents. The arguments of Shri Venugopal were
concisely supplemented by Shri P.C. Sen, learned Senior Counsel, Shri
C.N. Sreekumar, learned Senior Counsel, Smt. Haripriya Padmanabhan,
learned counsel, Shri Kuriakose Varghese, learned counsel, Shri John
Mathew, learned counsel and Shri Roy Abraham, learned counsel. G
• SUBMISSIONS ON BEHALF OF THE APPELLANTS:
15. Shri Gupta, learned Senior Counsel submitted that the impugned
judgment of the High Court of Kerala suffers on various grounds. Shri
Gupta further submitted that the High Court of Kerala committed a basic
H
410 SUPREME COURT REPORTS [2022] 3 S.C.R.

A error in holding that the 1996 Act is universally applicable. He submitted
that the 1996 Act would be applicable only when there is an agreement
between the parties, whereby they have agreed to refer their dispute to
arbitration. It is therefore submitted that what has been done by the
State Act is a cancellation of contract by a statute and as such, the State
Act or a part thereof would be referable to Entry 7 of List III of the
B
Seventh Schedule to the Constitution of India.
16. Shri Gupta submitted that the rest of the legislation deals with
the consequences of cancellation of the Arbitration clause in the
Agreement. It is submitted that on cancellation of an agreement, sub-
section (2) of Section 3 of the State Act provides an opportunity to any
C party to the agreement to file a suit in a competent civil court. He
submitted that Section 4 of the State Act extends the period of limitation
for filing of the suit. Section 5 of the State Act enables the State
Government to challenge the award on various grounds stated therein,
within a specified period. It is, therefore, submitted that the State Act is
D referable to Entries 7 and 13 of List III of the Seventh Schedule to the
Constitution of India and as such, within the legislative competence of
the State Legislature.
17. Shri Gupta further submitted that the legislative competence
of the State Legislature can only be circumscribed by the express
E 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
F 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 1.
18. Shri Gupta further submitted that there is no repugnancy
between the 1996 Act and the State Act. He submitted that the 1996
G 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

1
H [1955] 2 SCR 164
THE SECRETARY TO GOVT. OF KERALA, IRRIGATION 411
DEPARTMENT v. JAMES VARGHESE [B. R. GAVAI, J.]

Constitution of India. In support of this proposition, he relies on the A
judgments of this Court in the cases of G.C. Kanungo v. State of Orissa2,
State of Gujarat through Chief Secretary and Another v. Amber
Builders3, Madhya Pradesh Rural Road Development Authority and
Another v. L.G. Chaudhary Engineers and Contractors4 (hereinafter
referred to as “MP Rural 2012”), Madhya Pradesh Rural Road
B
Development Authority and Another v. L.G. Chaudhary Engineers
and Contractors5 (hereinafter referred to as “MP Rural 2018”).
19. Shri Gupta submitted that assuming, but without accepting,
that there is some conflict between the 1996 Act and the State Act, the
State Act having been reserved for the consideration of the President of
India and having received his assent, will prevail over the provisions of C
the 1996 Act, in view of Article 254 (2) of the Constitution of India.
20. Shri Gupta submitted that the State Act does not relate to any
Entry in List I of the Seventh Schedule to the Constitution of India. He
submitted that the approach of the High Court of Kerala has been totally
erroneous. It is submitted that since all the three Lists of the Seventh D
Schedule to the Constitution of India contain a number of entries, some
overlapping is bound to happen. In such a situation, the doctrine of pith
and substance is required to be applied to determine as to which entry
does a given piece of legislation relate to. He submitted that regard must
be had to the enactment as a whole, to its main object and to the scope E
and effect of its provisions. He submitted that when a legislation is
traceable, in pith and substance, to an entry with regard to which a State
is competent to legislate, then incidental and superficial encroachments
on the other entry will have to be disregarded. Reference in this respect
is made to the judgments of this Court in the cases of Hoechst
Pharmaceutical Ltd. and Others v. State of Bihar and Others6 and F
State of West Bengal v. Kesoram Industries Ltd. and Others7. It is
therefore submitted that since the impugned legislation is in pith and
substance a legislation in the field covered by Entries 7 and 13 of List III
of the Seventh Schedule to the Constitution of India, the same would not
invalidate the State Act. G
2
(1995) 5 SCC 96
3
(2020) 2 SCC 540
4
(2012) 3 SCC 495
5
(2018) 10 SCC 826
6
(1983) 4 SCC 45
7
(2004) 10 SCC 201 H
412 SUPREME COURT REPORTS [2022] 3 S.C.R.

A 21. Shri Gupta submitted that the High Court of Kerala has also
erred in holding that the 1996 Act is referable to 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
B
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
C ‘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 Others8.
22. Shri Gupta also relies on the rule of construction known as
D 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 9.
23. Shri Gupta further submitted that it is a settled rule of
E construction of the Constitution, that every attempt should be made to
harmonize apparently conflicting provisions and entries, not only of
different lists, but also of the same list and to reject the construction that
would rob one of the entries of its entire content and make it nugatory.
In this respect, he relies on the judgments of this Court in the cases of
Calcutta Gas Company (Proprietary) Ltd. v. State of West Bengal
F and Others10 and Sri Venkataramana Devaru and Others v. State of
Mysore and Others11.
24. Shri Gupta further submitted that since the provisions of Article
253 of the Constitution of India have the effect of restricting the power
of the State Legislature, the said Article should be given the narrowest
G possible meaning in order to harmonize it with the Entries in Lists II and
III of the Seventh Schedule to the Constitution of India. He submitted
8
[1960] 3 SCR 887
9
[1955] 2 SCR 374
10
1962 Supp (3) SCR 1
11
H [1958] SCR 895
THE SECRETARY TO GOVT. OF KERALA, IRRIGATION 413
DEPARTMENT v. JAMES VARGHESE [B. R. GAVAI, J.]

that this can be done by interpreting that only the legislations enacted to A
give effect to binding obligation are covered by the said Article.
25. Shri Gupta further submitted that the Model Law is a suggested
pattern for law makers which only recommends the practices to be
adopted in the international arbitration and not for the domestic arbitration
and as such, it cannot be held that it has any binding obligation insofar as B
domestic arbitration is concerned.
26. Shri Shishodia, learned Senior Counsel submitted that in the
earlier statutory scheme prior to the 1996 Act, the 1940 Act governed
the domestic arbitration, whereas the 1937 Act and the 1961 Act governed
international commercial arbitrations. He submitted that in the 1996 Act, C
the domestic arbitrations are governed by Part I, whereas Part II governs
international commercial arbitrations with separate specific provisions
for Geneva Convention Awards and New York Convention Awards. He
submitted that however, even in the 1996 Act, the historical as well as
contemporary distinction between an international commercial arbitration
and domestic arbitration remains. In this respect, he relies on the judgment D
of this Court in the case of Fuerst Day Lawson Limited v. Jindal
Exports Limited12. He submitted that the 1996 Act actually consolidates,
amends and puts together three different enactments.
27. Shri Shishodia further submitted that after the Presidential
assent was received under Article 254 (2) of the Constitution of India, E
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 vis-à-vis the 1940 Act and 1996 Act. In
this respect, he relies on the judgment of this Court in the case of Rajiv F
Sarin and Another v. State of Uttarakhand and Others13.
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. G
• 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
12
(2011) 8 SCC 333
13
(2011) 8 SCC 708 H
414 SUPREME COURT REPORTS [2022] 3 S.C.R.

A 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 all the projects in Kerala, for revocation
of arbitration clauses in agreements. He submitted that the High Court
of Kerala has rightly held that no material was placed by the State
Government to show that collusive awards had been made because of a
B
nexus between arbitrators and claimant contractors.
30. Learned Senior Counsel submitted that the State Act is traceable
to Entries 12, 13, 14 as well as Entry 37 of List I of the Seventh Schedule
to the Constitution of India. He submitted that Entries 12 to 14 relate to
United Nations Organization, participation in international conferences,
C associations and other bodies and implementing of decisions made thereat
and entering into treaties and agreements with foreign countries and
implementing of treaties, agreements and conventions with foreign
countries. He submitted that the State has enacted a legislature which is
related to these entries, which are exclusively within the domain of the
D Union Legislature. He further submitted that Entry 37 deals with foreign
loans. He submitted that since the State Act attempts to deal with the
loans taken from the World Bank, it will be an encroachment on the
legislative field reserved for the Union Legislature. It is therefore
submitted that the State Act is enacted by the State Legislature in respect
of entries which are exclusively within the jurisdiction of the Central
E Legislation and as such, beyond the competence of the State Legislature.
He submitted that the question of Presidential assent under Article 254
(2) of the Constitution of India would arise only when the legislation is in
respect of items covered in List III, i.e., the Concurrent List. Since the
State Act deals with the entries exclusively in List I, the Presidential
F assent would be of no consequence to save the State Act.
31. Shri Venugopal submitted that the 1996 Act is clearly referable
to the decision taken at international conference, i.e., the General
Assembly of United Nations held on 11th December 1985. In support of
the said submission, he relies on the judgment of this Court in the case of
G Maganbhai Ishwarbhai Patel Etc. v. Union of India and Another 14.
Relying on the judgment of this Court in the case of S. Jagannath v.
Union of India and Others15, he submitted that Article 253 of the
Constitution of India would also be applicable to the legislations enacted
14
(1970) 3 SCC 400
15
H (1997) 2 SCC 87
THE SECRETARY TO GOVT. OF KERALA, IRRIGATION 415
DEPARTMENT v. JAMES VARGHESE [B. R. GAVAI, J.]

for giving effect to the decisions taken at the international conference, A
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 B
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 C
Senior Counsel also relies on the judgments of this Court in the cases of
Mantri Techzone Private Limited v. Forward Foundation and
Others16, State of Bihar and Others v. Bihar Chamber of Commerce
and Others17 and Jayant Verma and Others v. Union of India and
Others18. D
33. Shri Venugopal further submitted that the State Act is also
discriminatory inasmuch as the State Government has been given an
absolute discretion as to against which award, it will prefer an appeal
and against which, it will not prefer an appeal. He relies on the judgments
of this Court in the cases of Suraj Mall Mohta and Co. v. A.V. E
Visvanatha Sastri and Another19 and B.B. Rajwanshi v. State of U.P.
and Others20.
34. Shri Venugopal further submitted that the State Act interferes
with the doctrine of “separation of powers” and encroaches upon the
powers of the judiciary, inasmuch as the State Act empowers the State F
to interfere with the awards. He submitted that this is not permissible in
view of the law laid down by this Court in the case of B.B. Rajwanshi
(supra).
35. Shri Venugopal would further submit that assuming, but without
admitting that the State Act was not arbitrary when it was originally G
passed, but by passage of time, it has become arbitrary and unreasonable.
16
(2019) 18 SCC 494
17
(1996) 9 SCC 136
18
(2018) 4 SCC 743
19
[1955] 1 SCR 448
20
(1988) 2 SCC 415 H
416 SUPREME COURT REPORTS [2022] 3 S.C.R.

A He submitted that much earlier to the enactment of the State Act, not
only the awards have become final but the amount awarded has already
been paid to the claimants. As such, if the State Act is permitted to
operate now, it will amount to arbitrariness and unreasonableness. He
therefore submitted that the present appeals deserve to be dismissed.
B 36. Shri P.C. Sen, learned Senior Counsel appearing on behalf of
some of the respondents submitted that the State Act has the effect of
depriving the respondents’ settled right of property under Article 300-A
of the Constitution of India which has been acquired as per law. He
submitted that the awards passed, create a right in the property and are
enforceable when the same are made a decree of the court. In this
C regard, he relies on the judgment of this Court in the case of Satish
Kumar and Others v. Surinder Kumar and Others21.
37. Shri Sen further submitted that in the present case, the awards
have been acted upon and payments have been made. Therefore, vested
rights have been crystalized in favour of the respondents. He submitted
D that such vested rights cannot be taken away by the State Act. Reliance
in this respect is placed on the judgment of this Court in the case of
Andhra Pradesh Dairy Development Corporation Federation v. B.
Narasimha Reddy and Others22.
38. Shri Sen further submitted that a unilateral alteration of contract
E 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
F Engineering and Construction Company Limited v. National
Highways Authority of India (NHAI)23.
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
G
the case of SREI Infrastructure Finance Limited v. Tuff Drilling
Private Limited24. He further submitted that the judgment of this Court
21
[1969] 2 SCR 244
22
(2011) 9 SCC 286
23
(2019) 15 SCC 131
24
H (2018) 11 SCC 470
THE SECRETARY TO GOVT. OF KERALA, IRRIGATION 417
DEPARTMENT v. JAMES VARGHESE [B. R. GAVAI, J.]

in the case of G.C. Kanungo (supra), rather than supporting the case of A
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 253 of the Constitution of India and as such, the State Act which
is repugnant thereto, would not be valid in law. B
41. Shri C.N. Sreekumar, learned Senior Counsel appearing on
behalf of some of the respondents submitted that the State Act is liable
to be declared invalid on the ground of manifest arbitrariness. It is
submitted that the State Act has been enacted, which acts to the prejudice
of the private parties and undoubtedly favours the State Government. It
is submitted that Section 34 (2A) of the 1996 Act came into effect on C
23rd October 2015, i.e., much after the enactment of the State Act. It is
therefore submitted that assuming that the State Act was validly enacted,
however upon introduction of Section 34 (2A) of the 1996 Act on 23 rd
October 2015, the State Act has been impliedly repealed. Reliance in
this respect is placed on the judgments of this Court in the cases of D
Saverbhai Amaidas v. State of Bombay25 and T. Barai v. Henry Ah
Hoe and Another26.
42. Smt. Padmanabhan, learned counsel appearing on behalf of
some of the respondents submitted that the assent of the President of
India under Article 254(2) of the Constitution of India is not a matter of E
idle formality. She submitted that unless the State satisfies that relevant
material was placed before the President of India and he was made
aware about the grounds on which the Presidential assent was sought,
the Presidential assent would not save the State Act from being invalid.
In this respect, she relies on the judgment of this Court in the case of
Gram Panchayat of Village Jamalpur v. Malwinder Singh and F
Others27.
43. Smt. Padmanabhan submitted that the State Act is also arbitrary
and violative of Article 14 of the Constitution of India. She submitted
that the State Act treats unequals equally by failing to make a distinction
between the cases where there is a fraud and where there is no fraud. G
In this respect, she relies on the judgment of this Court in the case of
State of Maharashtra v. Mrs. Kamal Sukumar Durgule and Others 28.
25
[1955] 1 SCR 799
26
(1983) 1 SCC 177
27
(1985) 3 SCC 661
28
(1985) 1 SCC 234 H
418 SUPREME COURT REPORTS [2022] 3 S.C.R.

A 44. Relying on the judgments of this Court in the cases of Ashok
Kumar alias Golu v. Union of India and Others29, S.S. Bola and
Others v. B.D. Sardana and Others30 and Madras Bar Association
v. Union of India and Another31,Smt. Padmanabhan submitted that
the legislature does not have the competence to enact a legislation which
sets aside the judgment or an award passed by a court.
B
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
C 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
D 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 Part-III of the Constitution of India, such an exercise of
power would be invalid in law. In this regard, he relies on the judgment
of this Court in the case of State of Kerala and Others v. Mar Appraem
E Kuri Company Limited and Another32.
47. Shri Mathew further submitted that the State Act is not only in
conflict with the 1996 Act but is also in conflict with the Commercial
Courts Act, 2015 (hereinafter referred to as “2015 Act”). He submitted
that all the disputes involved in the present matters are commercial
F disputes as defined under Section 2(c) of the 2015 Act. He submitted
that the 2015 Act is a subsequent Central enactment and therefore, the
State Act being an earlier Act enacted by the State Legislature and
repugnant to the Central enactment, cannot exist. It is submitted that the
enactment of the 2015 Act would amount to a pro tanto repeal of the
State Act. Reliance in this respect is placed on the judgments of this
G
Court in the cases of T. Barai (supra) and Mar Appraem Kuri
Company Limited and Another (supra).
29
(1991) 3 SCC 498
30
(1997) 8 SCC 522
31
2021 SCC OnLine SC 463
32
H (2012) 7 SCC 106
THE SECRETARY TO GOVT. OF KERALA, IRRIGATION 419
DEPARTMENT v. JAMES VARGHESE [B. R. GAVAI, J.]

48. Shri Mathew further submitted that only when the proceedings A
went against the State, they illegally enacted the State Act in order to
either deny payments or delay them by compelling the respondents to
face or to undergo an altogether different remedy for the very same
cause of action. In this regard, he relies on the judgments of this Court in
the cases of State of Tamil Nadu and Others v. K. Shyam Sunder
B
and Others33 and Deep Chand and Others v. State of Uttar Pradesh
and Others34.
49. Shri Kuriakose Varghese, learned counsel appearing on behalf
of some of the respondents submitted that apart from making the bald
allegation that there was collusion between the contractors and the
officials, no material is placed on record. He submitted that the State C
Act which has been enacted, in the absence of sufficient material, would
not be sustainable in law. Reliance in this respect is placed on the judgment
of this Court in the case of Ladli Construction Co. (P) Ltd. v. Punjab
Police Housing Corpn. Ltd. and Others35.
50. Shri Varghese submitted that though the State Act is purportedly D
enacted in public interest, rather than it being in public interest, it is
contrary to the public interest. It is submitted that this Court in the case
of Hindustan Construction Co. Ltd. and Another v. Union of India
and Others36, has held that reasonableness, adequate determining
principle and public interest have to march hand in hand.He submitted E
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 F
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 G
in the case of Kesoram Industries Ltd. (supra) is misplaced inasmuch
33
(2011) 8 SCC 737
34
[1959] Supp (2) SCR 8
35
(2012) 4 SCC 609
36
(2020) 17 SCC 324 H
420 SUPREME COURT REPORTS [2022] 3 S.C.R.

A 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
B
State Legislature would be denuded of the field altogether, beyond what
the treaty and/or the Parliamentary legislation covered. He submitted
that merely because the said Project was, in part, financed by the World
Bank, it cannot be said that the State Act is, in pith and substance, a
legislation in the field of foreign loans and is therefore, beyond the
C competence of the State Legislature.
53. Shri Gupta refuted the allegations with regard to arbitrary and
discriminatory nature of the State Act. He submitted that the correctness
of the reasons stated by the State Legislature cannot be the subject
matter of judicial review. Reliance in this respect is placed on the judgment
D of this Court in the case of K. Nagaraj and Others v. State of Andhra
Pradesh and Another37.
54. Shri Gupta submitted that Section 9 of the CPC provides for
the plenary jurisdiction of the civil courts to decide disputes of civil nature
unless excluded by law. He submitted that so long as the parties are
E governed by an arbitration agreement, the civil courts, though having
jurisdiction to entertain civil suits in respect of disputes arising out of the
contract between the parties, are required to refer the disputes, if any, to
arbitration under Sections 8 and 11 of the 1996 Act and Sections 20 and
34 of the 1940 Act. However, once the arbitration agreement stands
F cancelled, all fetters would stand removed and the civil courts will have
the jurisdiction to entertain the disputes. It is submitted that the argument
with regard to the forum to which an appeal would lie, being not provided
is without substance. He submitted that by virtue of Section 6 of the
State Act, CPC is applicable to all the proceedings and an appeal will lie
to the court, based on the court which is rendering the judgment or award
G and/or passing the decree on award. As such, the argument regarding
vagueness is without substance.
55. Insofar as the argument with regard to the State having the
right to pick and choose cases in which appeals are to be filed, Shri
37
H (1985) 1 SCC 523
THE SECRETARY TO GOVT. OF KERALA, IRRIGATION 421
DEPARTMENT v. JAMES VARGHESE [B. R. GAVAI, J.]

Gupta submitted that every litigant has a choice to accept the judgment A
and order of a trial court or to challenge the same. He submitted that it
is not the case where alternative proceedings are available to the State
to take administrative action against different parties, some of which are
more onerous than others. In this regard, he relies on the judgments of
this Court in the cases of Nagpur Improvement Trust and Another v.
B
Vithal Rao and Others38 and State of Kerala and Others v. T.M.
Peter and Others39. 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.
C
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. D

• CONSIDERATION:
LEGISLATIVE COMPETENCE OF THE STATE
LEGISLATURE TO ENACT THE STATE LAW:
E
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 question that will have to be answered is as to whether the
source of the impugned legislation (State Act) is Entry 13 of List III of F
the Seventh Schedule to the Constitution of India or as to whether the
impugned legislation (State Act) is referable to Entries 12, 13, 14 and 37
of List I of the Seventh Schedule and Article 253 of the Constitution of
India. We will also have to examine the scope of clause (2) of Article
254 of the Constitution of India.
G
58. It will be relevant to reproduce Entries 12, 13, 14 and 37 of
List I of the Seventh Schedule to the Constitution of India as under:

38
(1973) 1 SCC 500
39
(1980) 3 SCC 554
H
422 SUPREME COURT REPORTS [2022] 3 S.C.R.

A “Seventh Schedule
(Article 246)
List I – Union List
………….
B 12. United Nations Organization.
13. Participation in international conferences, associations and
other bodies and implementing of decisions made thereat.
14. Entering into treaties and agreements with foreign countries
and implementing of treaties, agreements and conventions with
C
foreign countries.
……..
37. Foreign loans.
……….”
D
59. It will also be apposite to refer to Entry 13 of List III of the
Seventh Schedule to the Constitution of India, which reads thus:
“Seventh Schedule
(Article 246)
E
List III – Concurrent List
…………
13. Civil procedure, including all matters included in the Code of
Civil Procedure at the commencement of this Constitution, limitation
F and arbitration.
……….”
60. Article 253 of the Constitution of India reads thus:
“253.Legislation for giving effect to international
G agreements. – Notwithstanding anything contained in the
foregoing provisions of this Chapter, Parliament has power to make
any law for the whole or any part of the territory of India for
implementing any treaty, agreement or convention with any other
country or countries or any decision made at any international
conference, association or other body.”
H
THE SECRETARY TO GOVT. OF KERALA, IRRIGATION 423
DEPARTMENT v. JAMES VARGHESE [B. R. GAVAI, J.]

61. For considering the question in hand, it will be apposite to seek A
guidance from the precedents of this Court. It will be relevant to refer to
the following observations of this Court in the case of G.C. Kanungo
(supra):
“10. …… Subject of arbitration finds place in Entry 13 of List III,
i.e., the Concurrent List of Seventh Schedule to the Constitution B
on which the legislation could be made either by Parliament or the
State Legislature. 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 C
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 D
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 E
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 of Orissa, notwithstanding
anything contained therein repugnant to what is in the Principal
Act of Parliament, it cannot be held to be unconstitutional as that F
made by the Orissa State Legislature without the necessary
legislative competence.”
62. It could thus be seen that this Court has observed that the
subject of arbitration finds place in Entry 13 of List III, i.e., the Concurrent
List of the Seventh Schedule to the Constitution of India. It has been G
held that the legislation pertaining to the said entry could be made either
by the Parliament or the State Legislature. It has been held that since
the subject of arbitration is in the Concurrent 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
H
424 SUPREME COURT REPORTS [2022] 3 S.C.R.

A 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
B
obtained. As such, the State Act so enacted would prevail in the State of
Kerala.
63. 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
C M.P. irrespective of the arbitration agreement in respect of works
contracts in the State of M.P. or its instrumentalities. An argument was
sought to be made on behalf of the claimants that the State Act was
repugnant to the 1996 Act and that in view of Section 85 of the 1996
Act, the M.P. Act, 1983 stood impliedly repealed. There was a difference
D of opinion between the two learned Judges on the Bench. A.K. Ganguly,
J., on the Bench, observed thus:
“38. The argument of repugnancy is also not tenable. Entry 13 of
the Concurrent List in the Seventh Schedule of the Constitution
runs as follows:
E “13. Civil procedure, including all matters included in the Code
of Civil Procedure at the commencement of this Constitution,
limitation and arbitration.”
In view of the aforesaid entry, the State Government is competent
to enact laws in relation to arbitration.
F
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 17-10-1983 which was
G published in the Madhya Pradesh Gazette Extraordinary dated
12-10-1983. 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
H
THE SECRETARY TO GOVT. OF KERALA, IRRIGATION 425
DEPARTMENT v. JAMES VARGHESE [B. R. GAVAI, J.]

provisions of the M.P. Act, 1983 under Sections 2(4) and 2(5) A
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) B
3 SCC 431 : 1979 SCC (Cri) 691] are very pertinent and the
following observations are excerpted: (SCC p. 450, para 37)
“37. … It is, therefore, clear that in view of this clear intention
of the legislature there can be no room for any argument that
the State Act was in any way repugnant to the Central Acts. C
We have already pointed out from the decisions of the Federal
Court and this Court that one of the important tests to find out
as to whether or not there is repugnancy is to ascertain the
intention of the legislature regarding the fact that the dominant
legislature allowed the subordinate legislature to operate in the
same field pari passu the State Act.” D

41. It is clear from the aforesaid observations that in the instant
case the latter Act made by Parliament i.e. the AC Act, 1996
clearly showed an intention to the effect that the State law of
arbitration i.e. the M.P. Act should operate in the State of Madhya
Pradesh in respect of certain specified types of arbitrations which E
are under the M.P. Act, 1983. This is clear from Sections 2(4)
and 2(5) of the AC Act, 1996. Therefore, there is no substance in
the argument of repugnancy and is accordingly rejected.”
64. Since Gyan Sudha Mishra, J. disagreed with A.K. Ganguly, J.
in the said case, the matter was referred to a larger Bench. F
65. The Bench consisting of three learned Judges in the case of
MP Rural 2018, agreed with the view expressed by Ganguly, J.
66. It could be seen that this Court in the case of G.C. Kanungo
(supra) as well as in the case of MP Rural 2018, has held that the
G
source of the enactment of the 1940 Act, 1996 Act so also the State
Acts legislated by Orissa and MP Legislatures is Entry 13 of List III of
the Seventh Schedule to the Constitution of India. Ordinarily, if there is
any conflict between the Central law and the State law, in view of clause
(1) of Article 254 of the Constitution of India, the Central law would
prevail. However, in view of clause (2) of Article 254 of the Constitution H
426 SUPREME COURT REPORTS [2022] 3 S.C.R.

A of India, the State law would prevail when it is reserved for consideration
and receives assent of the President of India.
67. Recently, this Court, in the case of G. Mohan Rao and Others
v. State of Tamil Nadu and Others40, has observed thus:
“47. Article 254(2) is produced again for ready reference thus:
B
“254. Inconsistency between laws made by Parliament
and laws made by the Legislatures of States. —
(1) …
(2) Where a law made by the Legislature of a State
C 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
D 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:
E (i) A law made by the legislature of the State (the 2019 Act in
this case);
(ii) Such law is made on a subject falling in the concurrent list
(Entry-42 of the Concurrent List in this case);

F (iii) Such law is repugnant to the provisions of an earlier/existing
law made by the Parliament (the 2013 Act in this case); and
(iv) The State law is reserved for the assent of the President
and has received the same.
49. Upon fulfilment of the above conditions, such State law would
G 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 between the law made by
the Parliament and State law and rendering that repugnancy
40
H 2021 SCC OnLine SC 440
THE SECRETARY TO GOVT. OF KERALA, IRRIGATION 427
DEPARTMENT v. JAMES VARGHESE [B. R. GAVAI, J.]

inconsequential upon procurement of Presidential assent. In this A
case, the State legislature duly passed the 2019 Act (State law)
on a subject of the concurrent list in the presence of a law made
by the Parliament (2013 Act) and obtained the assent of the
President to the same on 02.12.2019 after duly placing the State
law before the President and duly stating the reason for reserving
B
it for his assent. A priori, we hold that this is in compliance of
Article 254(2).
50. This understanding of Article 254(2) is well settled and
reference can be usefully made to the following paragraph of Pt.
Rishikesh40:
C
“15. Clause (2) of Article 254 is an exception to clause
(1). If law made by the State Legislature is reserved for
consideration and receives assent of the President
though the State law is inconsistent with the Central Act,
the law made by the Legislature of the State prevails
over the Central law and operates in that State as valid D
law. If Parliament amends the law, after the amendment made
by the State Legislature has received the assent of the
President, the earlier amendment made by the State
Legislature, if found inconsistent with the Central amended
law, both Central law and the State Law cannot coexist without E
colliding with each other. Repugnancy thereby arises and to
the extent of the repugnancy the State law becomes void under
Article 254(1) unless the State Legislature again makes law
reserved for the consideration of the President and receives
the assent of the President. Full Bench of the High Court held
that since U.P. Act 57 of 1976 received the assent of the F
President on 30-12-1976, while the Central Act was assented
on 9-9-1976, the U.P. Act made by the State Legislature, later
in point of time it is a valid law.”
(emphasis supplied)
G
51. The petitioners have advanced lengthy arguments as to how
the 2019 Act is repugnant to the 2013 Act. We are constrained to
observe that the whole exercise of pointing out any repugnancy
after a validating Act has obtained the assent of the President is
otiose. For, the whole purpose of Article 254(2) is to resuscitate
H
428 SUPREME COURT REPORTS [2022] 3 S.C.R.

A and operationalize a repugnant Act or repugnant provisions in such
Act. For, the Constitution provides concurrent powers to the states
as well on subjects falling in List-III. After duly complying 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
B
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
C 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.”
D 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 Act and that applying the principle of harmonization, both
E can exist. We find that in view of the State Act receiving the Presidential
assent, it will not be necessary to consider the said issue.
69. It is next sought to be urged on behalf of the respondents that
the State Act is essentially within the legislative competence of the Union.
It is submitted by the respondents that the State legislation is with respect
F to Entries 12, 13, 14 and 37 of List I of the Seventh Schedule to the
Constitution of India and as such, exclusively within the competence of
the Central Legislation. Entry 12 deals with United Nations Organization.
Entry 13 deals with participation in international conferences, associations
and other bodies and implementing of decisions made thereat. Entry 14
G deals with entering into treaties and agreements with foreign countries
and implementing of treaties, agreements and conventions with foreign
countries. Entry 37 deals with foreign loans.
70. It will be apposite to refer to the following observations of the
Constitution Bench in the case of Kesoram Industries Ltd. and Others
H
THE SECRETARY TO GOVT. OF KERALA, IRRIGATION 429
DEPARTMENT v. JAMES VARGHESE [B. R. GAVAI, J.]

(supra). In the said case, R.C. Lahoti, J., speaking for the majority, has A
observed thus:
“31. Article 245 of the Constitution is the fountain source of
legislative power. It provides — subject to the provisions of this
Constitution, Parliament may make laws for the whole or any
part of the territory of India, and the legislature of a State may B
make laws for the whole or any part of the State. The legislative
field between Parliament and the legislature of any State is divided
by Article 246 of the Constitution. Parliament has exclusive power
to make laws with respect to any of the matters enumerated in
List I in the Seventh Schedule, called the “Union List”. Subject to
the said power of Parliament, the legislature of any State has C
power to make laws with respect to any of the matters enumerated
in List III, called the “Concurrent List”. Subject to the abovesaid
two, the legislature of any State has exclusive power to make
laws with respect to any of the matters enumerated in List II,
called the “State List”. Under Article 248 the exclusive power of D
Parliament to make laws extends to any matter not enumerated
in the Concurrent List or State List. The power of making any
law imposing a tax not mentioned in the Concurrent List or State
List vests in Parliament. This is 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 E
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 lists are not “powers” of
legislation but “fields” of legislation. The Constitution effects a F
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 legislation having been demarcated, G
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 H
430 SUPREME COURT REPORTS [2022] 3 S.C.R.

A 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 Union law.
(3) Taxation is considered to be a distinct matter for
purposes of legislative competence. There is a distinction
B made between general subjects of legislation and taxation. The
general subjects of legislation are dealt with in one group of
entries and power of taxation in a separate group. The power
to tax cannot be deduced from a general legislative entry
as an ancillary power.
C (4) The entries in the lists being merely topics or fields of
legislation, they must receive a liberal construction inspired by
a broad and generous spirit and not in a narrow pedantic sense.
The words and expressions employed in drafting the entries
must be given the widest-possible interpretation. This is
because, to quote V. Ramaswami, J., the allocation of the
D subjects to the lists is not by way of scientific or logical definition
but by way of a mere simplex enumeratio of broad
categories. A power to legislate as to the principal matter
specifically mentioned in the entry shall also include within
its expanse the legislations touching incidental and
E ancillary matters.
(5) Where the legislative competence of the legislature of any
State is questioned on the ground that it encroaches upon the
legislative competence of Parliament to enact a law, the
question one has to ask is whether the legislation relates to any
F of the entries in List I or III. If it does, no further question need
be asked and Parliament’s legislative competence must be
upheld. Where there are three lists containing a large number
of entries, there is bound to be some overlapping among them.
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
G legislation relate. 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 doctrine of pith and substance is sometimes
expressed in terms of ascertaining the true character of
H legislation. The name given by the legislature to the legislation
THE SECRETARY TO GOVT. OF KERALA, IRRIGATION 431
DEPARTMENT v. JAMES VARGHESE [B. R. GAVAI, J.]

is immaterial. Regard must be had to the enactment as a whole, A
to its main objects and to the scope and effect of its provisions.
Incidental and superficial encroachments are to be disregarded.
(6) The doctrine of occupied field applies only when there is a
clash between the Union and the State Lists within an area
common to both. There the doctrine of pith and substance is to B
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 C
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)
D
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 E
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 true character of the legislation has to be ascertained.
Regard must be had to the enactment as a whole, to its main objects and
to the scope and effect of its provisions. It has been held that incidental F
and superficial encroachments are to be disregarded. It has been held
that 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.
72. If we look at the scheme of the State enactment, the subject G
matter of the enactment is arbitration. As has been held by the Constitution
Bench in the case of Kesoram Industries Ltd. and Others (supra), if
the State is competent to legislate on the subject, any incidental
encroachment on any item in List I would not affect the State Legislature.
In any case, as already observed hereinabove, this Court, in the cases of
H
432 SUPREME COURT REPORTS [2022] 3 S.C.R.

A G.C. Kanungo (supra) and MP Rural 2018, has specifically held that
the 1940 Act, the 1996 Act and the State Acts legislated by the Orissa
and M.P. Legislatures are referable to Entry 13 of List III of the Seventh
Schedule to the Constitution of India. As such, in view of the Presidential
assent under clause (2) of Article 254 of the Constitution of India, the
State Legislature would prevail.
B
73. Shri Venugopal, learned Senior Counsel has strongly relied on
paragraphs 234, 238, 239 and 293 in the case of Kesoram Industries
Ltd. and Others (supra), in support of the proposition that the State Act
is not within the legislative competence of the State Legislature, which
read thus:
C
“234. The Constitution-makers found the need for power-sharing
devices between the Centre and the State having regard to the
imperatives of the State’s security and stability and, thus, propelled
the thrust towards centralisation by using non obstante clause under
Article 246 so as to see that the federal supremacy is achieved.
D
…………..
238. It can be seen that Article 253 contains non obstante clause.
Article 253, thus, operates notwithstanding anything contained in
Article 245 and Article 246. Article 246 confers power on
Parliament to enact laws with respect to matters enumerated in
E List I of the Seventh Schedule to the Constitution. Entries 10 to
21 of List I of the Seventh Schedule pertain to international law.
In making any law under any of these entries, Parliament is
required to keep Article 51 in mind.
239. Article 253 of the Constitution provides that while giving
F 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
G 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
H Ltd. [(2002) 9 SCC 232])”
THE SECRETARY TO GOVT. OF KERALA, IRRIGATION 433
DEPARTMENT v. JAMES VARGHESE [B. R. GAVAI, J.]

74. It is to be noted that the aforesaid paragraphs are from the A
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? : B
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 Constitution of India and since the said Act has been enacted
in accordance with the decision taken at the international conference to
implement the UNCITRAL Model law, the State Legislature is not C
competent to enact the State Law.
76. It is submitted that since the 1996 Act has been enacted in
accordance with the decision taken by the General Assembly of the
United Nations, the same would be referable to Article 253 of the
Constitution of India. D
77. In this respect, it is to be noted that the Preamble of the 1996
Act would reveal that the recommendation of the General Assembly of
the United Nations is for adopting UNCITRAL Model Law insofar as
international commercial arbitrations are concerned. It will further be
relevant to refer to paragraphs (2) and (3) of the Statement of Objects E
and Reasons of the 1996 Act:
“Statement of Objects and Reasons
1. ……………
2. The United Nations Commission on International Trade Law
F
(UNCITRAL) adopted in 1985 the Model Law on International
Commercial Arbitration. The General Assembly of the United
Nations has recommended that all countries give due consideration
to the said Model Law, in view of the desirability of uniformity of
the law of arbitral procedures and the specific needs of international
commercial arbitration practice. The UNCITRAL also adopted G
din 1980 a set of Conciliation Rules. The General Assembly of
the United Nations has recommended the use of these Rules in
cases where the disputes arise in the context of international
commercial relations and the parties seek amicable settlement of
their disputes by recourse to conciliation. An important feature of
H
434 SUPREME COURT REPORTS [2022] 3 S.C.R.

A the said UNCITRAL Model Law and Rules is that they have
harmonized concepts on arbitration and conciliation of different
legal systems of the world and thus contain provisions which are
designed for universal application.
3. Though the said UNCITRAL Model Law and Rules are
B intended to deal with international commercial arbitration and
conciliation, they could, with appropriate modifications, serve as a
model for legislation on domestic arbitration and conciliation. The
present Bill seeks to consolidate and amend the law relating to
domestic arbitration, international commercial arbitration,
enforcement of foreign arbitral awards and to define the law
C relating to conciliation, taking into account the said UNCITRAL
Model Law and Rules.
…………”
78. A perusal thereof would clearly reveal that the General
D 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
E 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
F 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
G
Arbitration of the United Nations
Commission on International Trade Law
The General Assembly,
Recognizing the value of arbitration as a method of settling
H disputes arising in international commercial relations,
THE SECRETARY TO GOVT. OF KERALA, IRRIGATION 435
DEPARTMENT v. JAMES VARGHESE [B. R. GAVAI, J.]

Convinced that the establishment of a model law on arbitration A
that is acceptable to States with different legal, social and
economic systems contributes to the development of
harmonious international economic relations,
Noting that the Model law on International Commercial
Arbitration was adopted by the United Nations Commission B
on International Trade Law at its eighteenth session, after due
deliberation and extensive consultation with arbitral institutions
and individual experts on international commercial arbitration,
Convinced that the Model Law, together with the Convention
on the Recognition and Enforcement of Foreign Arbitral C
Awards and the Arbitration Rules of the United Nations
Commission on International Trade Law recommended by the
General Assembly in its resolution 31/98 of 15 December 1976,
significantly contributes to the establishment of a unified legal
framework for the fair and efficient settlement of disputes
arising in international commercial relations, D

1. Requests the Secretary-General to transmit the text of the
Modern Law on International Commercial Arbitration of the
United Nations Commission on International Trade Law,
together with the travaux preparatoires from the eighteenth
session of the Commission, to Governments and to arbitral E
institutions and other interested bodies, such as chambers of
commerce;
2. Recommends that all States give due consideration to
the Model Law on International Commercial Arbitration,
in view of the desirability of uniformity of the law of F
arbitral procedures and the specific needs of international
commercial arbitration practice.”
[emphasis supplied]
81. A perusal of the aforesaid Resolution would clearly reveal G
that what has been done by the United Nations General Assembly vide
the aforesaid Resolution is to recommend to all the States to give due
consideration to the Model Law on international commercial arbitration.
However, a perusal of the Resolution itself would reveal that it does not
create any binding obligation on the States to enact the UNCITRAL
Model Law as it is. H
436 SUPREME COURT REPORTS [2022] 3 S.C.R.

A 82. Shri Venugopal, in support of his contention, has strongly relied
on the following observations of this Court in the case of S. Jagannath
(supra):
“48. At this stage we may deal with a question which has
incidentally come up for our consideration. Under para 2 of the
B 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
C 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:
D “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.
E Parliament has enacted the Act under Entry 13 of List I Schedule
VII read with Article 253 of the Constitution of India. The CRZ
Notification having been issued under the Act shall have overriding
effect and shall prevail over the law made by the legislatures of
the States.”
F 83. Shri Venugopal further relied on the following observations of
this Court in the case of Mantri Techzone Private Limited (supra):
“40. The Tribunal has been established under a constitutional
mandate provided in Schedule VII List I Entry 13 of the
Constitution of India, to implement the decision taken at the
G United Nations Conference on Environment and Development.
The Tribunal is a specialised judicial body for effective and
expeditious disposal of cases relating to environmental protection
and conservation of forests and other natural resources
including enforcement of any legal right relating to environment.
The right to healthy environment has been construed as a part
H
THE SECRETARY TO GOVT. OF KERALA, IRRIGATION 437
DEPARTMENT v. JAMES VARGHESE [B. R. GAVAI, J.]

of the right to life under Article 21 by way of judicial A
pronouncements. Therefore, the Tribunal has special jurisdiction
for enforcement of environmental rights.”
84. At this juncture, it will be relevant to note that the Preamble to
the Environment (Protection) Act, 1986 (hereinafter referred to as the
“1986 Act”) would itself reveal that it refers to the decision taken at B
United Nations Conference on the Human Environment held at Stockholm
in June 1972, in which India participated and wherein, a decision was
taken to take appropriate steps for the protection and improvement of
human environment. It further states that it was considered necessary
to implement the decisions aforesaid insofar as they relate to the
protection and improvement of environment and the prevention of hazards C
to human beings and other living creatures. So also, the National Green
Tribunal Act, 2010 (hereinafter referred to as the “NGT Act”) refers to
India being a party to the decision taken at the United Nations Conference
on the Human Environment held at Stockholm in June 1972, in which
India had participated and the decisions were taken to call upon the D
States to take appropriate steps for the protection and improvement of
human environment. It further refers to the decision taken at the United
Nations Conference on Environment and Development held at Rio de
Janeiro in June 1992, in which India had participated. The States were
called upon to provide effective access to judicial and administrative
proceedings including redress and remedy, and to develop national laws E
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 F
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 G
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. H
438 SUPREME COURT REPORTS [2022] 3 S.C.R.

A STATE LEGISLATURE’S ENCROACHMENT ON
JUDICIAL POWERS:
86. We next consider the finding of the High Court that since the
State Act, in effect, annuls the awards passed by the Arbitrators and/or
the judgments or decrees passed by the courts, it will amount to
B encroachment on judicial powers of the courts and as such, is hit by the
doctrine of separation of powers.
87. A perusal of the list containing details of the Kerala arbitration
cases involved in the present matters would reveal that in most of the
cases, the awards were passed prior to the year 1992 and the awards
C were made rule of the court prior to the year 1993. In some of the
matters, on the date of the enactment of the State Act, the appeals
preferred by the State under Section 39 of the 1940 Act were pending
before the competent courts.
88. The appellants have heavily relied on the judgment of this
D Court in the case of G.C. Kanungo (supra), wherein this Court has
observed thus:
“15. What is of importance and requires our examination is,
whether such court when makes an award of the Special
Arbitration Tribunal filed before it, a “Rule of Court” by its
judgment and decree, as provided under Section 17 of the
E
Principal Act, does such award of the Special Arbitration
Tribunal merge in the judgment and decree, as argued on behalf
of the petitioners. We find it difficult to accede to the argument.
What cannot be overlooked is, that the award of a Special
Arbitration Tribunal, as that of an award of an arbitrator, is, as
F we have already pointed out, a decision made by it on the
claim or cause referred for its decision by way of arbitral
dispute. When the court makes such award of a Special
Arbitration Tribunal a “Rule of Court” by means of its judgment
and decree, it is not deciding the claim or cause as it would
have done, if it had come before it as a suit for its judgment
G
and decree in the course of exercise of its ordinary civil
jurisdiction. Indeed, when such award is made to come by a
party to the dispute before court for being made a “Rule of
Court” by its judgment and decree, it is to obtain the superadded
seal of the court for such award, as provided for under the
H Principal Act, to make it enforceable against the other party
THE SECRETARY TO GOVT. OF KERALA, IRRIGATION 439
DEPARTMENT v. JAMES VARGHESE [B. R. GAVAI, J.]

through the machinery of court. Therefore, the judgment and A
decree rendered by the civil court in respect of an award is
merely to superadd its seal thereon for making such award
enforceable through the mechanism available with it for
enforcement of its own judgments and decrees. The mere fact
that such judgments or decrees of courts by which the awards
B
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 C
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 non-merger of awards
in judgments and decrees of courts, which we have stated,
receives support from certain observations in the decision of
D
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 E
Court observed that an award is entitled to that respect which
is due to the judgment and decree of last resort. And if the
award which had been pronounced between the parties has
become final, a second reference of the subject of the award
becomes incompetent. It further observed that if the award is
F
final and binding on the parties, it can hardly be said that it is a
waste paper unless it is made a “Rule of Court”. Hegde, J.
who agreed with the above observations of Sikri, J. (as his
Lordship then was) while speaking for Bachawat, J. also
observed that the arbitration has the first stage which
commences with arbitration agreement and ends with the G
making of the award, and then a second stage which relates to
the enforcement of the award. He also observed that it was
one thing to say that a right is not created by the award but it is
an entirely different thing to say that the right created cannot
be enforced without further steps.
H
440 SUPREME COURT REPORTS [2022] 3 S.C.R.

A 16. Therefore, our answer to the point is that the awards of
Special Arbitration Tribunals did not merge in judgments and
decrees of the courts even though the courts by their judgments
and decrees made such awards “Rules of Court” for their
enforceability through the courts availing their machinery used
for execution of their decisions, that is, their own judgments
B
and decrees.
17. It is true, as argued on behalf of the petitioners, that a
legislature has no legislative power to render ineffective the
earlier judicial decisions by making a law which simply declares
the earlier judicial decisions as invalid or not binding, for such
C power if exercised would not be a legislative power exercised
by it but a judicial power exercised by it encroaching upon the
judicial power of the State exclusively vested in courts. The
said argument advanced, since represents the correct and well-
settled position in law, we have thought it unnecessary to refer
D to the decisions of this Court cited by learned counsel for the
petitioners, in that behalf and hence have not referred to them.
18. For the 1991 Amendment Act to become
unconstitutional on the ground that it has rendered
judgments and decrees of courts by which the Special
E Arbitration Tribunals’ awards are made “Rules of Court”,
invalid or ineffective, such judgments and decrees must
be decisions of courts rendered by them in exercise of
their judicial power of decision-making in respect of the
subjects of dispute before them and not where they
render judgments and decrees to make the awards of
F 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
G “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 decision-
making, as it happens in the causes directly brought
before them by way of suits for their decisions. As we
H have already pointed out, question of claim or cause of a party
THE SECRETARY TO GOVT. OF KERALA, IRRIGATION 441
DEPARTMENT v. JAMES VARGHESE [B. R. GAVAI, J.]

which gets merged in the award of a Special Arbitration A
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 B
for the decisions of Special Arbitration Tribunals contained in
their awards. This situation makes it clear that power exercised
by the civil courts in making the awards of Special Arbitration
Tribunals “Rules of Court” by their judgments and decrees is
not their judicial power exercised in rendering judgments and C
decrees, as civil courts exercise their powers vested in them
for resolving disputes between parties. To be precise,
judgments and decrees made by civil courts in making
the awards of the Special Arbitration Tribunals the
“Rules of Court” for the sole purpose of their
enforceability through the machinery of court, cannot D
make such judgments and decrees of civil court, the
decisions rendered by civil courts in exercise of judicial
power of the State exclusively invested in them under
our Constitution. Thus, when the judgments and decrees
made by civil courts in making the awards of Special Arbitration E
Tribunals “Rules of Court” are not those judgments and decrees
of courts made in exercise of judicial power of State vested in
them under our Constitution, the 1991 Amendment Act when
nullifies the judgments and decrees of courts by which awards
of Special Arbitration Tribunals are made “Rules of Court”,
cannot be regarded as that enacted by the Orissa State F
Legislature encroaching upon the judicial powers of State
exercisable under our Constitution by courts as sentinels of
Rule of Law, a basic feature of our Constitution. Hence, the
1991 Amendment Act insofar as it nullifies judgments and
decrees of courts by which awards of Special Arbitration
Tribunals are made “Rules of Court”, even where they are G
affirmed by higher courts, cannot be regarded as that made by
the Orissa State Legislature transgressing upon the judicial
power of State vested in courts as would make it
unconstitutional.”
[emphasis supplied] H
442 SUPREME COURT REPORTS [2022] 3 S.C.R.

A 89. It could be seen that this Court has observed that the judgments
and decrees made by the civil courts in making the awards of the Special
Arbitration Tribunals the “Rules of Court” are for the sole purpose of
their enforceability through the machinery of courts and therefore, cannot
be such judgments and decrees of civil courts made in exercise of the
judicial power of the State exclusively vested in them under the
B
Constitution of India. This Court, therefore, held that the 1991
Amendment Act, which nullifies the judgments and decrees of the court
by which awards of Special Arbitration Tribunals are made “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.
C 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
D 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
E 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
F SC 522 : 1991 Supp (2) SCR 497] ]. From this, it follows that
the State Legislature by enacting the 1991 Amendment Act
has encroached upon the judicial power entrusted to judicial
authority resulting in infringement of a basic feature of the
Constitution — the Rule of Law. Thus, when the 1991
G Amendment Act nullifies the awards of the Special
Arbitration Tribunals, made in exercise of the judicial
power conferred upon them under the 1984 Amendment
Act, by encroaching upon the judicial power of the State,
we have no option but to declare it as unconstitutional
having regard to the well-settled and undisputed legal
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THE SECRETARY TO GOVT. OF KERALA, IRRIGATION 443
DEPARTMENT v. JAMES VARGHESE [B. R. GAVAI, J.]

position that a legislature has no legislative power to A
render ineffective the earlier judicial decisions by making
a law which simply declares the earlier judicial decisions
as invalid and not binding, for such powers, if exercised,
would not be legislative power exercised by it, but
judicial power exercised by it encroaching upon the
B
judicial power of the State vested in a judicial tribunal as
the Special Arbitration Tribunal under the 1984
Amendment Act. Moreover, where the arbitral awards
sought to be nullified under the 1991 Amendment Act
are those made by Special Arbitration Tribunals
constituted by the State itself under the 1984 Amendment C
Act to decide arbitral disputes to which State was a party,
it cannot be permitted to undo such arbitral awards which
have gone against it, by having recourse to its legislative
power for grant of such permission as could result in
allowing the State, if nothing else, abuse of its power of
D
legislation.”
[emphasis supplied]
91. The court further held that under the 1984 Amendment Act,
the Special Arbitration Tribunals were constituted by the State itself to
decide arbitral disputes. It held that the State was a party before such E
Tribunals and therefore, it cannot be permitted to undo such arbitral
awards which had gone against it. It further held that if such an exercise
is permitted to be done, by having recourse to its legislative power, it
would result in nothing elsebut allowing the State, abuse of its power of
legislation.
F
92. 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. In this respect, G
the Court relied on the judgment of this Court in the case of Cauvery
Water Disputes Tribunal41. 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
41
1993 Supp (1) SCC 96 (2) H
444 SUPREME COURT REPORTS [2022] 3 S.C.R.

A 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.
B 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 notmergein the judgments and decrees
of the court. But on the other hand, the Court goes on to hold that the
C 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.
D 94. Since G.C. Kanungo (supra) has ultimately held the 1991
Amendment Act to be unconstitutional on the ground that it annuls the
awards passed by the Special Arbitration Tribunals, it may not be
necessary to consider the question as to whether G.C. Kanungo (supra)
was right in holding that the judgments and decrees vide which the awards
E are made “Rules of Court”, are not passed in exercise of judicial power.
However, the perusal of paragraph 17 in the case of G.C. Kanungo
(supra) would reveal that this Court recorded the submissions made on
behalf of the petitioners therein that, a Legislature has no legislative
power to render ineffective the earlier judicial decisions by making a
law which simply declares the earlier judicial decisions as invalid or not
F binding. It also recorded that if such a power is exercised, it will not be
legislative power exercised by it but a judicial power, encroaching upon
the judicial power of the State exclusively vested in courts. It further
appears that various decisions of this Court were cited by the counsel
for the petitioners therein, however, this Court did not find it necessary
G to refer to the said decisions, since this Court found that the said
submissions represent a correct and well-settled position in law. It will
be worthwhile to note that in the said case, this Court was considering
the provisions of the 1940 Act as against the provisions of the Orissa
State Act. In the present case also, all the awards so also the judgments
and decrees passed by the civil courts making such awards “Rules of
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THE SECRETARY TO GOVT. OF KERALA, IRRIGATION 445
DEPARTMENT v. JAMES VARGHESE [B. R. GAVAI, J.]

Court” have been passed under the 1940 Act. We, therefore, find that it A
will be appropriate to examine the correctness of the said finding.
95. It will be necessary to consider the scheme of the 1940 Act as
will be found in Sections 15, 16, 17 and 30 thereof, which read thus:
“15. Power of Court to modify award.—The Court may by
order modify or correct an award— B
(a) where it appears that a part of the award is upon a matter
not referred to arbitration and such part can be separated from
the other part and does not affect the decision on the matter
referred; or
(b) where the award is imperfect in form, or contains any C
obvious error which can be amended without affecting such
decision; or
(c) where the award contains a clerical mistake or an error
arising from an accidental slip or omission.
16. Power to remit award.—(1) The Court may from time to D
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 left undetermined any of the matters
referred to arbitration, or where it determines any matter not E
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 to be incapable of
execution; or
(c) where an objection to the legality of the award is apparent F
upon the face of it.
(2) Where an award is remitted under sub-section (1) the Court
shall fix the time within which the arbitrator or umpire shall submit
his decision to the Court:
G
Provided that any time so fixed may be extended by subsequent
order of the Court.
(3) An award remitted under sub-section (1) shall become void
on the failure of the arbitrator or umpire to reconsider it and submit
his decision within the time fixed.
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446 SUPREME COURT REPORTS [2022] 3 S.C.R.

A 17. Judgment in terms of award.—Where the Court sees no
cause to remit the award or any of the matters referred to arbitration
for reconsideration or to set aside the award, the Court shall, after
the time for making an application to set aside the award has
expired, or such application having been made, after refusing it,
proceed to pronounce judgment according to the award, and upon
B
the judgment so pronounced a decree shall follow, and no appeal
shall lie from such decree except on the ground that it is in excess
of, or not otherwise in accordance with the award.
……………..
C 30. Grounds for setting aside award.— An award shall not
be set aside except on one or more of the following grounds,
namely—
(a) that an arbitrator or umpire has misconducted himself or
the proceedings;
D (b) that an 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;
(c) that an award has been improperly procured or is otherwise
invalid.”
E
96. A perusal of Section 15 of the 1940 Act would reveal that the
court, by an order, may modify or correct an award, where it appears
that a part of the award is upon a matter not referred to arbitration and
such part can be separated from the other part and does not affect the
decision on the matter referred. The Court may also modify or correct
F the award, where the award is imperfect in form, or contains any obvious
error which can be amended without affecting such decision. The power
under Section 15 of the 1940 Act could also be exercised, where the
award contains a clerical mistake or an error arising from an accidental
slip or omission.
G 97. Section 16 of the 1940 Act empowers the court to remit the
award or any matter referred to arbitration to the arbitrators or umpire
for reconsideration, where it finds that the award has left undetermined
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. Such power
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THE SECRETARY TO GOVT. OF KERALA, IRRIGATION 447
DEPARTMENT v. JAMES VARGHESE [B. R. GAVAI, J.]

can also be exercised, where the award is so indefinite as to be incapable A
of execution. So also, where an objection to the legality of the award is
apparent upon the face of it, the court would be empowered to remit the
award.
98. Section 30 of the 1940 Act provides the grounds on which an
award could be set aside. It provides that the award could be set aside B
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. C

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, D
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 been refused. E
100. 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 F
modify the awards. As such, it cannot be said that the court, while passing
a judgment, which is followed by a decree, does not exercise judicial
power. The court is not supposed to act mechanically and be a Post-
Office.
101. A Constitution Bench of this Court in the case of Harinagar G
Sugar Mills Ltd. v. Shyam Sundar Jhunjhunwala and Others42, had
an occasion to consider the scope of Section 111 of the Companies Act,
1956. It was sought to be urged before this Court that the authority of
the Central Government under Section 111 of the Companies Act, 1956
42
[1962] 2 SCR 339 H
448 SUPREME COURT REPORTS [2022] 3 S.C.R.

A was an administrative authority. Rejecting the said submission, J.C. Shah,
J. observed thus:
“………But that in an appeal under Section 111 clause
(3) there is a lis or dispute between the contesting parties
relating to their civil rights, and the Central Government is
B invested with the power to determine that dispute according to
law i.e. it has to consider and decide the proposal and the
objections in the light of the evidence, and not on grounds of
policy or expediency. The extent of the power which may
be exercised by the Central Government is not delimited
by express enactment, but the power is not on that
C account unrestricted. The power in appeal to order
registration of transfers has to be exercised subject to
the limitations similar to those imposed upon the
exercise of the power of the court in a petition for that
relief under Section 155: the restrictions which inhere
D the exercise of the power of the court also apply to the
exercise of the appellate power by the Central
Government i.e. the Central Government has to decide
whether in exercising their power, the directors are
acting oppressively, capriciously or corruptly, or in some
way mala fide. The decision has manifestly to stand those
E objective tests, and has not merely to be founded on the
subjective satisfaction of the authority deciding the
question. The authority cannot proceed to decide the question
posed for its determination on grounds of expediency: the statute
empowers the Central Government to decide the disputes
F 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
G 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 sub-section (8) of Section 111 clearly indicates
H that in circumstances specified therein reasonable
THE SECRETARY TO GOVT. OF KERALA, IRRIGATION 449
DEPARTMENT v. JAMES VARGHESE [B. R. GAVAI, J.]

compensation may be awarded in lieu of the shares. This A
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.
B
In The Province of Bombay v. Kusaldas S.
Advani [(1950) SCR 621] this Court considered the distinction
between decisions quasi-judicial and administrative or
ministerial for the purpose of ascertaining whether they are
subject to the jurisdiction to issue a writ of certiorari, Fazl Ali,
J. at p. 642 observed: C

“The word ‘decision’ in common parlance is more or less a
neutral expression and it can be used with reference to
purely executive acts as well as judicial orders. The mere
fact that an executive authority has to decide something
does not make the decision judicial. It is the manner in which D
the decision has to be arrived at which makes the difference,
and the real test is: Is there any duty to decide judicially?”
The Court also approved of the following test suggested
in King v. London County Council [(1931) 2 KB 215, 233]
by Scrutton, L.J.: E

“It is not necessary that it should be a court in the sense in
which this Court is a court; it is enough if it is exercising,
after hearing evidence, judicial functions in the sense that it
has to decide on evidence between a proposal and an
opposition; and it is not necessary to be strictly a court; if it F
is a tribunal which has to decide rights after hearing evidence
and opposition, it is amenable to the writ of certiorari.”
In Bharat Bank Ltd., Delhi v. Employees [(1950) SCR
459] the question whether an adjudication by an Industrial
Tribunal functioning under the Industrial Tribunals Act was G
subject to the jurisdiction of this Court under Article 136 of the
Constitution fell to be determined: Mahajan, J. in that case
observed:
“There can be no doubt that varieties of Administrative
Tribunals and Domestic Tribunals are known to exist in this H
450 SUPREME COURT REPORTS [2022] 3 S.C.R.

A country as well as in other countries of the world but the
real question to decide in each case is as to the extent of
judicial power of the State exercised by them. Tribunals
which do not derive authority from the sovereign power
cannot fall within the ambit of Article 136. The condition
precedent for bringing a tribunal within the ambit of Article
B
136 is that it should be constituted by the State. Again a
tribunal would be outside the ambit of Article 136 if is not
invested with any part of the judicial functions of the State
but discharges purely administrative or executive duties.
Tribunals however which are found invested with certain
C functions of a court of justice and have some of its trappings
also would fall within the ambit of Article 136 and would be
subject to the appellate control of this Court whenever it is
found and necessary to exercise that control in the interests
of justice.”
D 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 quasi-judicial functions
merely because it is not expressly required to be guided
by any recognised substantive law in deciding the
E 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.
F 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
G 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 treated as
confidential; but that does not make the decision of the taxing
authorities merely executive. As the dispute between the
parties relates to the civil rights and the Act provides
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THE SECRETARY TO GOVT. OF KERALA, IRRIGATION 451
DEPARTMENT v. JAMES VARGHESE [B. R. GAVAI, J.]

for a right of appeal and makes detailed provisions about A
hearing and disposal according to law, it is impossible to
avoid the inference that a duty is imposed upon the
Central Government in deciding the appeal to act
judicially.”
[emphasis supplied] B
102. It has been held by this Court that the restrictions which
inhere the exercise of the power of the court also apply to the exercise
of the appellate power by the Central Government. It has been held that
the Central Government has to decide whether in exercising their power,
the directors are acting oppressively, capriciously or corruptly, or in some C
way mala fide. The decision has manifestly to stand those objective
tests, and has not merely to be founded on the subjective satisfaction of
the authority deciding the question. It has been held that 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 of the Companies Act, 1956.
It could be seen that this Court has held that since the dispute between D
the parties relates to the civil rights and the Act provides for a right of
appeal and makes detailed provisions about hearing and disposal according
to law, it is impossible to avoid the inference that a duty is imposed upon
the Central Government in deciding the appeal to act judicially.
103. M. Hidayatullah, J., in a separate but concurring judgment, E
observed thus:
“Courts and tribunals act “judicially” in both senses, and in the
term “court” are included the ordinary and permanent tribunals
and in the term “tribunal” are included all others, which are not so
included. Now, the matter would have been simple, if the F
Companies Act, 1956 had designated a person or persons
whether by name or by office for the purpose of hearing an
appeal under Section 111. It would then have been clear
that though such person or persons were not “courts” in
the sense explained, they were clearly “tribunals”. The Act G
says that an appeal shall lie to the Central Government.
We are, therefore, faced with the question whether the
Central Government can be said to be a tribunal. Reliance is
placed upon a recent decision of this Court in Shivji
Nathubai v. Union of India [(1960) 2 SCR 775] where it was
H
452 SUPREME COURT REPORTS [2022] 3 S.C.R.

A 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]
B
and Rex v. Electricity Commissioners [(1924) 1 KB 171] that the
action of the Central Government was quasi-judicial 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
C 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 quasi-judicial act.”
This observation only establishes that the decision is a quasi-judicial
D 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 raised, it should be
decided.
The function that the Central Government performs
E under the Act and the Rules is to hear an appeal against
the action of the Directors. For that purpose, a memorandum
of appeal setting out the grounds has to be filed, and the
company, on notice, is required to make representations,
if any, and so also the other side, and both sides are allowed
F to tender evidence to support their representations. The
Central Government by its order then directs that the
shares be registered or need not be registered. The Central
Government is also empowered to include in its orders,
directions as to payment of costs or otherwise. The function
of the Central Government is curial and not executive.
G There is provision for a hearing and a decision on evidence,
and that is indubitably a curial function.
Now, in its functions the Government often reaches
decisions, but all decisions of the Government cannot be regarded
as those of a tribunal. Resolutions of the Government may affect
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THE SECRETARY TO GOVT. OF KERALA, IRRIGATION 453
DEPARTMENT v. JAMES VARGHESE [B. R. GAVAI, J.]

rights of parties, and yet, they may not be in the exercise of the A
judicial power. Resolutions of the Government may be amenable
to writs under Articles 32 and 226 in appropriate cases, but may
not be subject to a direct appeal under Article 136 as the decisions
of a tribunal. The position, however, changes when
Government embarks upon curial functions, and proceeds
B
to exercise judicial power and decide disputes. In those
circumstances, it is legitimate to regard the officer who
deals with the matter and even Government itself as a
tribunal. 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. The word “tribunal” is C
a word of wide import, and the words “court” and “tribunal”
embrace within them the exercise of judicial power in all
its forms. The decision of the Government thus falls within the
powers of this Court under Article 136.”
[emphasis supplied] D
104. M. Hidayatullah, J. proceeded to consider as to whether the
Central Government, while exercising its powers under Section 111 of
the Companies Act, 1956, can be said to be a “Tribunal”. On perusal of
the scheme of Section 111 of the Companies Act, 1956, His Lordship
has observed that the function of the Central Government under the said E
section is curial and not executive. There is a provision for a hearing 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 F
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. G
105. A Constitution Bench of this Court in the case of Shankarlal
Aggarwala and Others v. Shankarlal Poddar and Others 43,was
considering a question as to whether the order passed by the Company
43
[1964] 1 SCR 717
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454 SUPREME COURT REPORTS [2022] 3 S.C.R.

A 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
B in the course of administration and not a judicial order. The sale
by the liquidator was, of course, effected in the course of the
realisation of the assets of the company and for the purpose of
the amount realised being applied towards the discharge of the
liabilities and the surplus to be distributed in the manner provided
by the Act. It would also be correct to say that when a liquidator
C effects a sale he is not discharging any judicial function. Still it
does not follow that every order of the Court merely for the reason
that it is passed in the course of the realisation of the assets of the
company must always be treated as merely an administrative one.
The question ultimately depends upon the nature of the
D order that is passed. An order according sanction to a sale
undoubtedly involves a discretion and cannot be termed
merely a ministerial order, for before confirming the sale
the Court has to be satisfied, particularly where the
confirmation is opposed, that the sale has been held in
accordance with the conditions subject to which alone the
E liquidator has been permitted to effect it, and that even
otherwise the sale has been fair and has not resulted in any
loss to the parties who would ultimately have to share the
realisation.
The next question is whether such an order could be
F classified as an administrative order. One thing is clear, that the
mere fact that the order is passed in the course of the administration
of the assets of the company and for realising those assets is not
by itself sufficient to make it an administrative, as distinguished
from a judicial order. For instance, the determination of amounts
G due to the company from its debtors which is also part of the
process of the realisation of the assets of the company is a matter
which arises in the course of the administration. It does not on
that account follow that the determination of the particular amount
due from a debtor who is brought before the Court is an
administrative order.
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THE SECRETARY TO GOVT. OF KERALA, IRRIGATION 455
DEPARTMENT v. JAMES VARGHESE [B. R. GAVAI, J.]

It is perhaps not possible to formulate a definition which A
would satisfactorily distinguish, in this context, between an
administrative and a judicial order. That the power is entrusted to
or wielded by a person who functions as a Court is not decisive of
the question whether the act or decision is administrative or judicial.
But we conceive that an administrative order would be one
B
which is directed to the regulation or supervision 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, C
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
D
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 E
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 Claims of the highest bidder
who put forward the contention that he had satisfied the
requirements laid down for the acceptance of his bid and was
F
consequently entitled to have the sale in his favour confirmed,
particularly so as he was supported in this behalf by the official
liquidators. On the other hand there was the 1st respondent and
not to speak of him, the large body of unsecured creditors whose
interests, even if they were not represented by the 1st respondent,
the Court was bound to protect. If the sale of which confirmation G
was sought was characterised by any deviation from the conditions
subject to which the sale was directed to be held or even otherwise
was for a gross undervalue in the sense that very much more
could reasonably be expected to be obtained if the sale were
properly held in view of the figure of Rs 3,37,000 which had been
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456 SUPREME COURT REPORTS [2022] 3 S.C.R.

A bid by Nandlal Agarwalla, it would be the duty of the Court to
refuse the confirmation in the interests of the general body of
creditors and this was the submission made by the 1st respondent.
There were thus two points of view presented to the Court by
two contending parties or interests and the Court was called upon
to decide between them. And the decision vitally affected the
B
rights of the parties to property. In this view we are clearly of the
opinion that the order of the Court was, in the circumstances, a
judicial order and not an administrative one and was therefore not
inherently incapable of being brought up in appeal.

C [emphasis supplied]
106. The Constitution Bench in the case of Shankarlal
Aggarwala and Others (supra) held that the question as to whether
the order passed by a court is administrative or judicial, would depend
upon the nature of the order that is passed. The order undoubtedly involves
D a discretion and cannot be termed merely a ministerial order. His Lordship
distinguished an administrative order to be one which is directed to the
regulation or supervision of matters as against 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. It has further
been held that one of the tests for deciding whether the power exercised
E is administrative or judicial, 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.
F 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
G 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
H
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DEPARTMENT v. JAMES VARGHESE [B. R. GAVAI, J.]

in the case of G.C. Kanungo (supra) would be per incuriam the A
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 what
could be construed as judicial power of a court. In the case of Harinagar B
Sugar Mills Ltd. (supra), though the power to be exercised was by the
Central Government, the Constitution Bench, upon examining the scope
of Section 111 of the Companies Act, 1956, held the said power to be a
judicial one. In the case of Shankarlal Aggarwala and Others (supra),
the Constitution Bench distinguished between the administrative and
judicial powers of the court. This Court in paragraph 17 in the case of C
G.C. Kanungo (supra) rightly observed that the State Legislature has
no legislative power to render ineffective the earlier judicial decisions by
making a law. It cannot simply declare the earlier decisions invalid or not
binding. However, observing this, in paragraph 18, this Court held that
the power exercised by the court in making the awards of the Special D
Arbitration Tribunals the “Rules of Court”, is not a judicial power. We
are of the considered view that the aforesaid finding is not only per
incuriam the provisions of the 1940 Act but also the two judgments of
the Constitution Bench in the cases of Harinagar Sugar Mills Ltd.
(supra) and Shankarlal Aggarwala and Others (supra).
E
109. A seven-Judge Bench of this Court in the case of Bengal
Immunity Company Limited v. State of Bihar and Others44, was
considering the question as to whether the majority decision in the case
of State of Bombay and Another v. United Motors (India) Limited
and Others45 laid down a correct law. The authority of the court to go
beyond the majority decision was questioned. While considering the said F
objection, before going into the merits of the matter, S.R. Das, Acting
C.J., observed thus:
“……..Learned counsel for some of the interveners
question our authority to go behind the majority decision. It is,
therefore, necessary at this stage to determine this preliminary G
question before entering upon a detailed discussion on the question
of construction of Article 286.
44
[1955] 2 SCR 603
45
[1953] SCR 1069
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458 SUPREME COURT REPORTS [2022] 3 S.C.R.

A In England, the Court of Appeal has imposed upon its power
of review of earlier precedents a limitation, subject to certain
exceptions. The limitation thus accepted is that it is bound to follow
its own decisions and those of courts of Coordinate jurisdiction,
and the “full” court is in the same position in this respect as a
division Court consisting of three members. The only exceptions
B
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
C 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.
D
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
E 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
Chemicals Ltd. and Another46, this Court observed thus:
“40. ‘Incuria’ literally means ‘carelessness’. In practice per
F incuriam appears to mean per ignoratium. English courts have
developed this principle in relaxation of the rule of stare decisis.
The ‘quotable in law’ is avoided and ignored if it is rendered, ‘in
ignoratium of a statute or other binding authority’.
(Young v. Bristol Aeroplane Co. Ltd. [(1944) 1 KB 718 : (1944)
G 2 All ER 293] ). Same has been accepted, approved and adopted
by this Court while interpreting Article 141 of the Constitution
which embodies the doctrine of precedents as a matter of law.
In Jaisri Sahu v. Rajdewan Dubey [(1962) 2 SCR 558 : AIR
1962 SC 83] this Court while pointing out the procedure to be
46
H (1991) 4 SCC 139
THE SECRETARY TO GOVT. OF KERALA, IRRIGATION 459
DEPARTMENT v. JAMES VARGHESE [B. R. GAVAI, J.]

followed when conflicting decisions are placed before a bench A
extracted a passage from Halsbury’s Laws of England incorporating
one of the exceptions when the decision of an appellate court is
not binding.
41. Does this principle extend and apply to a conclusion of law,
which was neither raised nor preceded by any consideration. In B
other words can such conclusions be considered as declaration of
law? Here again the English courts and jurists have carved out an
exception to the rule of precedents. It has been explained as rule
of sub-silentio. “A decision passes sub-silentio, in the technical
sense that has come to be attached to that phrase, when the
particular point of law involved in the decision is not perceived by C
the court or present to its mind.” (Salmond on Jurisprudence 12th
Edn., p. 153). In Lancaster Motor Company (London)
Ltd. v. Bremith Ltd. [(1941) 1 KB 675, 677 : (1941) 2 All ER 11]
the Court did not feel bound by earlier decision as it was rendered
‘without any argument, without reference to the crucial words of D
the rule and without any citation of the authority’. It was approved
by this Court in Municipal Corporation of Delhi v. Gurnam
Kaur. [(1989) 1 SCC 101] The bench held that, ‘precedents sub-
silentio and without argument are of no moment’. The courts thus
have taken recourse to this principle for relieving from injustice
perpetrated by unjust precedents. A decision which is not express E
and is not founded on reasons nor it proceeds on consideration of
issue cannot be deemed to be a law declared to have a binding
effect as is contemplated by Article 141. Uniformity and
consistency are core of judicial discipline. But that which escapes
in the judgment without any occasion is not ratio decidendi. In B. F
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 G
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.”
H
460 SUPREME COURT REPORTS [2022] 3 S.C.R.

A 111. This Court further in the case of Sundeep Kumar Bafna v.
State of Maharashtra and Another47, 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,
B 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 incuriam any provision in a statute, rule or regulation,
which was not brought to the notice of the court. A decision or
judgment can also be per incuriam if it is not possible to reconcile
C its ratio with that of a previously pronounced judgment of a co-
equal or larger Bench; or if the decision of a High Court is not in
consonance with the views of this Court. It must immediately be
clarified that the per incuriam rule is strictly and correctly
applicable to the ratio decidendi and not to obiter dicta. It is
often encountered in High Courts that two or more mutually
D irreconcilable decisions of the Supreme Court are cited at the
Bar. We think that the inviolable recourse is to apply the earliest
view as the succeeding ones would fall in the category of per
incuriam.”
112. The perusal of the judgment in the case of G.C. Kanungo
E (supra) would reveal that though the court has recorded the submissions
of the counsel for the petitioners therein, that the Legislature has no
power to render ineffective the earlier judicial decisions by making a
law and though judgments were cited in support of the said proposition,
the court did not consider it necessary to refer to the said decisions.
F However, without considering the provisions of the 1940 Act or the two
judgments of the Constitution Bench in the cases of Harinagar Sugar
Mills Ltd. (supra) and Shankarlal Aggarwala and Others (supra), it
went on to hold that the powers exercised by a court while making an
award “Rule of Court”, are not judicial powers. We find that the finding
to that effect in the case of G.C. Kanungo (supra), apart from being
G per incuriam the provisions of the 1940 Act and the law laid down by
the Constitution Bench in the cases of Harinagar Sugar Mills Ltd.
(supra) and Shankarlal Aggarwala and Others (supra), would also be
hit by the rule of sub silentio.

47
H (2014) 16 SCC 623
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DEPARTMENT v. JAMES VARGHESE [B. R. GAVAI, J.]

113. The perusal of the subsequent judgments of this Court would A
also fortify the position that the powers exercised by the court under the
provisions of the 1940 Act are judicial powers and that the power to
make an award “Rule of Court” is not a mechanical power.
114. In the case of Steel Authority of India Ltd. v. J.C.
Budharaja, Government and Mining Contractor 48, this Court B
observed thus:
“17. ……Whether the arbitrator has acted beyond the terms of
the contract or has travelled beyond his jurisdiction would depend
upon facts, which however would be jurisdictional facts, and
are required to be gone into by the court……” C
[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 Others49,observed thus:
D
“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 E
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 F
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 award is erroneous on the face of it.
Discretion having been conferred on the court to remit an
award, the said discretion has to be judicially exercised and
an appellate court would not be justified in interfering with G
the exercise of discretion unless the discretion has been
misused. What is an error apparent on the face of an award
which requires to be corrected, has always been a subject-matter
48
(1999) 8 SCC 122
49
(2001) 4 SCC 241 H
462 SUPREME COURT REPORTS [2022] 3 S.C.R.

A of discussion. An error of law on the face of the award would
mean that one can find in the award or a document actually
incorporated thereto stating the reasons for a judgment some legal
propositions which are the basis of the award and which can be
said to be erroneous. Documents not incorporated directly or
indirectly into the award cannot be looked into for the purpose of
B
finding out any alleged error. The courts are not to investigate
beyond the award of the arbitrators and the documents actually
incorporated therein and, therefore, when there would be no patent
error on the face of the award, it would not be open for the court
to go into the proceedings of the award. If the application for
C remittance filed by the claimants invoking jurisdiction of the court
under Section 16 is examined from the aforesaid standpoint and if
the order of the learned civil court, remitting Claim Item 1 is tested
in the light of the discussions made above, the conclusion is
irresistible that no case for remittance had been made out and the
learned trial Judge exercised his discretion on the grounds which
D
do not come within the four corners of the provisions of Section
16 of the Arbitration Act. In fact no reasons had been ascribed
for interference with the award, rejecting Claim Item 1 and for
remittance of the same. The High Court being the court of appeal,
was therefore, fully justified in exercise of its appellate power in
E correcting the error made by the Civil Judge in remitting Claim
Item 1.”
[emphasis supplied]
116. A seven-Judge Bench of this Court, in the case of SBP &
Co. v. Patel Engineering Ltd. and Another50, was considering the
F question as to whether the powers of the Chief Justice of High Court or
Chief Justice of India under Sections 11(6) and 8 of the 1996 Act are
administrative or judicial.
117. After referring to the earlier decisions, P.K. Balasubramanyan,
J., delivering a majority judgment, observed thus:
G
“36. Going by the above 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,
50
H (2005) 8 SCC 618
THE SECRETARY TO GOVT. OF KERALA, IRRIGATION 463
DEPARTMENT v. JAMES VARGHESE [B. R. GAVAI, J.]

is called upon to decide between them and the decision vitally A
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
B
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 C
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 the arbitration
application and the passing of an administrative order appointing
an arbitrator or an Arbitral Tribunal. It is really the giving of an D
opportunity of being heard. There have been cases where claims
for appointment of an arbitrator based on an arbitration agreement
are made ten or twenty years after the period of the contract has
come to an end. There have been cases where the appointment
of an arbitrator has been sought, after the parties had settled the
accounts and the party concerned had certified that he had no E
further claims against the other contracting party. In other words,
there have been occasions when dead claims are sought to be
resurrected. There have been cases where assertions are made
of the existence of arbitration agreements when, in fact, such
existence is strongly disputed by the other side who appears on F
issuance of notice. Controversies are also raised as to whether
the claim that is sought to be put forward comes within the purview
of the arbitration clause concerned at all. The Chief Justice has
necessarily to apply his mind to these aspects before coming to a
conclusion one way or the other and before proceeding to appoint
an arbitrator or declining to appoint an arbitrator. Obviously, this is G
an adjudicatory process. An opportunity of hearing to both parties
is a must. Even in administrative functions if rights are affected,
rules of natural justice step in. The principles settled
by Ridge v. Baldwin [(1963) 2 All ER 66 : 1964 AC 40 : (1963) 2
WLR 935 (HL)] are well known. Therefore, to the H
464 SUPREME COURT REPORTS [2022] 3 S.C.R.

A extent, Konkan Rly. [(2002) 2 SCC 388] states that no notice
need be issued to the opposite party to give him an opportunity of
being heard before appointing an arbitrator, with respect, the same
has to be held to be not sustainable.”
118. It could thus be seen that this Court in unequivocal terms has
B held that the powers exercised by the Chief Justice of the High Court or
Chief Justice of India under Section 11(6) of the 1996 Act are not
administrative but are judicial powers. It would thus not sound to reason,
that when a power under Section 11(6) of the 1996 Act for appointment
of an arbitrator has been held to be a judicial power, the power to make
an award a “Rule of Court”, which can be made only upon the satisfaction
C of the court on the existence of the eventualities set out in Section 17 of
the 1940 Act, is not an exercise of judicial power.
119. A Constitution Bench of this Court in the case of State of
Tamil Nadu v. State of Kerala and Another51, after an elaborate survey
of all the earlier judgments, has summed up the Law on “separation of
D 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,
E 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
F 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
G drawing formal lines between the three organs—legislature,
executive and judiciary. In that sense, even in the absence of
express provision for separation of powers, the separation of
powers between the legislature, executive and judiciary is not

51
H (2014) 12 SCC 696
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DEPARTMENT v. JAMES VARGHESE [B. R. GAVAI, J.]

different from the Constitutions of the countries which contain A
express provision for separation of powers.
126.2. Independence of courts from the executive and legislature
is fundamental to the rule of law and one of the basic tenets of
Indian Constitution. Separation of judicial power is a significant
constitutional principle under the Constitution of India. B
126.3. Separation of powers between three organs—the
legislature, executive and judiciary—is also nothing but a
consequence of principles of equality enshrined in Article 14 of
the Constitution of India. Accordingly, breach of separation of
judicial power may amount to negation of equality under Article C
14. Stated thus, a legislation can be invalidated on the basis of
breach of the separation of powers since such breach is negation
of equality under Article 14 of the Constitution.
126.4. The superior judiciary (High Courts and Supreme Court)
is empowered by the Constitution to declare a law made by the D
legislature (Parliament and State Legislatures) void if it is found
to have transgressed the constitutional limitations or if it infringed
the rights enshrined in Part III of the Constitution.
126.5. The doctrine of separation of powers applies to the final
judgments of the courts. The legislature cannot declare any E
decision of a court of law to be void or of no effect. It can, however,
pass an amending Act to remedy the defects pointed out by a
court of law or on coming to know of it aliunde. In other words, a
court’s decision must always bind unless the conditions on which
it is based are so fundamentally altered that the decision could not
have been given in the altered circumstances. F
126.6. If the legislature has the power over the subject-matter
and competence to make a validating law, it can at any time make
such a validating law and make it retrospective. The validity of a
validating law, therefore, depends upon whether the legislature
possesses the competence which it claims over the subject-matter G
and whether in making the validation law it removes the defect
which the courts had found in the existing law.
126.7. The law enacted by the legislature may apparently seem
to 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 H
466 SUPREME COURT REPORTS [2022] 3 S.C.R.

A 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:
B (i) Does the legislative prescription or legislative direction
interfere with the judicial functions?
(ii) Is the legislation targeted at the decided case or whether
impugned law requires its application to a case already finally
decided?
C (iii) What are the terms of law; the issues with 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
D 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 yet in substance if it is
shown as an attempt to interfere with the judicial process, such law may
E be invalidated being in breach of doctrine of separation of powers. The
Constitution Bench stipulated three questions to be asked in such a
situation, which are reproduced hereinabove.
121. We have already held that since the State Act is referable to
Entry 13 of List III of the Seventh Schedule to the Constitution of India,
F it is within the competence of the State Legislature. The question that
will have to be considered is whether it is an attempt to interfere with
the judicial process. For that, we will have to consider the three questions
framed by the Constitution Bench in the case of State of Tamil Nadu v.
State of Kerala and Another (supra). A perusal of the various provisions
of the State Act would clearly show that the State Act has been enacted
G
since the State Government was aggrieved by various awards passed
against it. It was therefore found expedient, in the public interest, to
cancel the arbitration clause in the agreement, to revoke the authority of
the arbitrators appointed thereunder and to enable the filing of appeals
against the awards or decrees. As already discussed hereinabove, most
H of the awards were made “Rules of Court” prior to 1993. In many of the
THE SECRETARY TO GOVT. OF KERALA, IRRIGATION 467
DEPARTMENT v. JAMES VARGHESE [B. R. GAVAI, J.]

cases, appeals were also preferred by the State Government. As such, A
we find that the legislative prescriptions and legislative directions in the
State Act undoubtedly interfere with the judicial functions. It is also clear
that the legislation is targeted at the awards passed which have become
“Rule of Court”. As already discussed hereinabove, the powers exercised
by the courts under Section 17 of the 1940 Act are judicial powers of the
B
State. As such, we are of the considered view that question Nos. 1 and
2 as framed by the Constitution Bench in the case of State of Tamil
Nadu v. State of Kerala and Another (supra) are required to be
answered in the affirmative. Upon consideration of the terms of the
State Act, the issues with which it deals, it is clear that the State Act
interferes with the judicial functions. C
122. We are therefore of the considered view that the State Act,
which has the effect of annulling 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. D
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 Others52.
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: E
“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 F
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 G
now well settled that in the absence of rules under Article 309 of
the Constitution in respect of a particular area, aspect or subject,
it is permissible for the State to make provisions in exercise of its
executive powers under Article 162 which is coextensive with its
52
(2003) 1 SCC 364 H
468 SUPREME COURT REPORTS [2022] 3 S.C.R.

A legislative powers laying conditions of service and rights accrued
to or acquired by a citizen would be as much rights acquired under
law and protected to that extent. The orders passed by the
Government, from time to time beginning from February 1967 till
1985 and at any rate up to the passing of the Act, to meet the
administrative exigencies and cater to the needs of public interest
B
really and effectively provided sufficient legal basis for the
acquisition of rights during the period when they were in full force
and effect. The orders of the High Court as well as the Tribunal
also recognised and upheld such rights and those orders attained
finality without being further challenged by the Government, in
C the manner known to law. Such rights, benefits and perquisites
acquired by the teachers concerned cannot be said to be rights
acquired otherwise than in accordance with law or brushed aside
and trampled at the sweet will and pleasure of the Government,
with impunity. Consequently, we are unable to agree that the
legislature could have validly denied those rights acquired by the
D
appellants retrospectively not only depriving them of such rights
but also enact a provision to repay and restore the amounts paid
to them to the State. The provisions of the Act, though can be
valid in its operation “in futuro” cannot be held valid insofar as it
purports to restore status quo ante for the past period taking away
E the benefits already available, accrued and acquired by them. For
all the reasons stated above the reasons assigned by the majority
opinion of the Tribunal could not be approved in our hands. The
provisions of Sections 2 and 3(a) insofar as they purport to
take away the rights from 10-2-1967 and obligate those who
had them to repay or restore them back to the State are
F
hereby struck down as arbitrary, unreasonable and
expropriatory and as such are violative of Articles 14 and
16 of the Constitution of India. No exception could be taken,
in our view, to the prospective exercise of powers thereunder
without infringing the rights already acquired by the appellants
G and the category of the persons similarly situated whether
approached 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.”
H [emphasis supplied]
THE SECRETARY TO GOVT. OF KERALA, IRRIGATION 469
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124. It could be seen that this Court has held that the provisions of A
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
B
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 C
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, since we have held that the State Act is liable to
be held unconstitutional on the ground of encroachment upon the judicial
powers of the State, we do not find it necessary to deal with the D
submissions made on behalf of the parties with regard to other issues.
• CONCLUSION:
127. In the result, we hold as under:
(i) That the State Act in pith and substance is referable to E
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 F
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 case of G.C. Kanungo (supra) to
G
the effect that the powers exercised by the courts in passing
judgments and decrees for making the arbitration awards
“Rule of Court” is not an exercise of judicial power, is per
incuriam the provisions of the 1940 Act and the judgments
of the Constitution Bench in the cases of Harinagar Sugar
H
470 SUPREME COURT REPORTS [2022] 3 S.C.R.

A Mills Ltd. (supra) and Shankarlal Aggarwala and Others
(supra); and
(iii) That the High Court of Kerala is right in law in holding that
the State Act encroaches upon the judicial power of the
State and is therefore liable to be struck down as being
B unconstitutional.
128. The present appeals are accordingly disposed of. Pending
application(s), if any, shall stand disposed of in the above terms. No
order as to costs.
129. Before we part with the judgment, we place on record our
C deep appreciation for the valuable assistance rendered by the learned
counsel appearing on behalf of the parties.

Bibhuti Bhushan Bose Appeals disposed of.

D

E

F

G

H