M/S. NORTHERN COALFIELD LTD. versus HEAVY ENGINEERING CORP. LTD. & ANR.

Citation: [2016] 5 S.C.R. 69 · Decided: 13-07-2016 · Supreme Court of India · Bench: T.S. THAKUR, R. BANUMATHI · Disposal: Appeal(s) allowed

Judgment (excerpt)

[2016) 5 S.C.R. 69 
MIS. NORTHERN COALFIELD LTD. 
v. 
HEAVY ENGINEERING CORP. LTD. & ANR. 
(Civil Appeal No. 6296of2016) 
JULY 13, 2016 
[T.S. THAKUR, CJI AND R. BANUMATHI, J.] 
Government Corporations: Government contracts - Redressal 
of commercial disputes between public sector enterprises inter se as 
well as between the public sector enterprises and the Government 
departments - Procedure for settlement of disputes - In the instant 
case, di~pute arose between two govern111ent owned corporations -
Referred to resolution in terms of the 'permanent in-house 
administrative machinery' set up by the Govern11ient -
Arbitra/ 
award - Aggrieved by the award, appellant filed Suit - Defendant 
claimed that suit was barred in view of the existence of specially 
prescribed procedure for resolving disputes and in the light of said 
procedure, neither party to the dispute was entitled to take recourse 
to proceedings in any court without permission of the Co111111ittee on 
Disputes (COD) - High Court rejected the plaint accepting the plea 
of defendant - On appeal, held: In ONGC case, it was held that 
permission of COD was necessary to proceed with the suit -
However, COD stood dissolved and the orders directing constitution 
of COD is reversed and, therefore, requirement of clearance of COD 
should not be insisted upon at this stage - In view thereof. there is 
no question of either obtaining or insisting upon any clearance 
from the same - Therefore, orders passed by High Court rejecting 
the plaint on the ground that the same was not preceded by 
permission from COD is unsustainable -
Right of the appellant to 
de111and such an adjudication cannot be denied si111ply because it 
happens to be a Govern111ent owned company for even when the 
appellant is a govern111ent company, it has its legal character as an 
entity separate from the Govern111ent -
Just because it had resorted 
to the permanent procedure or taken part in the proceedings there 
can be no estoppel against its seeking redress in accordance with 
law - Matter referred to sole arbitrator for adjudication of all 
outstanding disputes between the two corporations. 
69 
A 
B 
c 
D 
E 
F 
G 
H 
70 
A 
B 
c 
D 
E 
F 
G 
H 
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SUPREME COURT REPORTS 
[2016] 5 S.C.R. 
Allowing the appeal, ~he Court 
HELD: 1. Commercial disputes between public sector 
enterprises inter se as well as between the public sector 
enterprises and the Government departments were in the 
ordinary course settled through arbrtration by Government 
Officers or good offices of empowered government agencies like 
Bureau of Public Enterprises. Department of Legal Affairs 
however submitted a note dated 8 .. May, 1987 on the subject 
which was considered by a Committee of Secretaries in its meeting 
held on 26'h June, 1987. The Committee of Secretaries 
suggested that a permanent machinery for arbitration should be 
set up in the Department of Public Enterprises to settle all 
commercial disputes between PSE inter se and between PSE and 
Government department excluding disputes concerning income 
tax, customs and excise. The Committee also suggested that there 
should be a contractual clause binding the parties to the 
commercial contracts to refer all their disputes for settlement to 
the Permanent Machinery of Arbitrators. The Committee of 
.. Secretaries proposed that Bureau of Public Enterprises should 
bring a note for consideration of the Cabinet in that regard which 
note was prepared and upon submission to the Cabinet was 
approved in its meeting held on 24'h February, 1989. The Cabinet 
decision envisaged that all Public Sector Enterprises include a 
contractual clause in their future and current commercial contracts 
regarding settlement of disputes by arbitration by resorting to 
Permanent Machinery of Arbitration and that administrative 
Ministries shall issue necessary directives to the PSEs under 
the relevant clause of the Articles of Association. The directives 
and draft outline of procedure to be .followed by the Permanent 
Machinery of Arbitrators in the Bureau of Public Enterprises was 
accordingly issued in terms of DPE D.O. No. 15(9)/86-BPE(Fin) 
dated 29'h March, 1989. The procedure for settlement_ of disputes 
so devised was however outside the framework of the Arbitration 
·Act, 1940 which then held the field. iPara 14] [78-G-H; 79-A-E) 
2 .. The disputes between t~e appellant and respondents 
were referred for settlement in terms of the Permanent Machinery 
for Arbitrat

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